Obama hopes Mubarak will make "the right decision"

WASHINGTON (Reuters) - President Barack Obama said on Friday he hoped Egyptian President Hosni Mubarak will make "the right decision" to steer his country through mass protests against his rule but stopped short of urging his resignation.

Since large demonstrations against Mubarak's 30-year rule began 11 days ago, Washington has gradually distanced itself from its long-time ally and called for "an orderly transition" to democracy to begin immediately.

In what may have been a bid to quash a report that U.S. and Egyptian officials discussed Mubarak's immediate resignation in favor of Vice President Omar Suleiman, Obama stressed that "the future of Egypt will be determined by its people."

However, the U.S. president also pointedly noted that Mubarak has already announced he will not seek reelection in September and that "his term is up relatively shortly."

"Having made that psychological break, that decision that he will not be running again, I think the most important thing for him to ask himself ... is how do we make that transition effective and lasting and legitimate," Obama said at a news conference with Canadian Prime Minister Stephen Harper.

"The key question he should be asking himself is: how do I leave a legacy behind in which Egypt is able to get through this transformative period?' And my hope is ... that he will end up making the right decision," Obama said.

Egypt has been a U.S. ally throughout Mubarak's tenure and it is strategically vital to American interests because of its peace treaty with Israel, its control of the Suez Canal and its steadfast opposition to militant Islam.

After two days of clashes between Mubarak loyalists and anti-Mubarak protesters and efforts to cut off news coverage of the demonstrations, Obama said the rights of protesters, human rights activists and journalists must be respected.

'OLD WAYS' WON'T WORK

"Going back to the old ways is not going to work. Suppression's not going to work. Engaging in violence is not going to work. Attempting to shut down information flows is not going to work," he said in his first public response to a question about the crisis since it began the week before last.

"The only thing that will work is moving (an) orderly transition process that begins right now, that engages all the parties, that leads to democratic practices, fair and free elections, a representative government that is responsive to the grievances of the Egyptian people," he added.

Egyptian protests, sparked by a popular revolution that led former Tunisian President Zine al-Abedine Ben Ali to flee in January, have posed several dilemmas for the United States.

U.S. officials have been loathe to abandon an ally, on whom they have relied to secure Israel's western border and promote a wider Arab-Israeli peace, in part because it could signal to other Arab allies that they are fair-weather friends.

While it has become clear to U.S. officials that the huge demonstrations in Egypt -- more than a million people turned out on Tuesday -- show a marked turn against Mubarak, they are reluctant to be seen as interfering directly in its affairs.

On the 11th day of unprecedented massive protests which have revolutionized Egypt and the wider Arab world, some 200,000 men and women from all walks of life streamed past patient soldiers to the capital's Tahrir Square.

(Additional reporting by Jeff Mason, Philip Stewart, Mark Hosenball, Matt Spetalnick, Tabassum Zakaria and Arshad Mohammed)

(Writing by Arshad Mohammed; Editing by Todd Eastham)