* Settlement issue obstacle to renewing peace talks
* Washington seeking comprehensive peace, envoy says
* Netanyahu says U.S.-Israeli relations still strong
(Adds Clinton comments on Iran, paragraphs 8)
By Jeffrey Heller
JERUSALEM, July 26 The United States launched a fresh drive on Sunday to restart Middle East peace talks, sending senior officials to the region to deal with issues ranging from Jewish settlements to Iran's nuclear ambitions.
The visits by Middle East envoy George Mitchell, Defence Secretary Robert Gates and National Security Adviser Jim Jones were a strong signal from U.S. President Barack Obama of his intention to keep Israeli-Arab peacemaking high on his agenda.
Obama's demand, in accordance with a 2003 U.S.-backed peace "road map", to freeze Jewish settlement in the occupied West Bank and Arab East Jerusalem has met stiff resistance from Israeli Prime Minister Benjamin Netanyahu.
Playing down the most serious rift in U.S.-Israeli ties in a decade, Netanyahu told his cabinet: "It is only natural, that within a fabric of friendly relations between allies, there isn't full agreement on all points."
He described Israel's relationship with Washington as "important and steadfast", a departure from tough comments he made only a week ago when he said he would not accept orders from the United States on Jewish settlement in East Jerusalem.
Palestinian President Mahmoud Abbas has said talks with Israel, suspended for more than six months, cannot resume until all Israeli settlement activity ceases.
"We are trying to reach understandings on various issues so that we can, together, advance our common goals: peace, security and prosperity for all of the Middle East," Netanyahu said.
U.S. Secretary of State Hillary Clinton told NBC's "Meet the Press" on Sunday that Iran would not be allowed to have a nuclear weapon and reiterated Washington's commitment to protect Israel from any threat posed by Iran.
Flying into Israel from talks in Damascus with President Bashar al-Assad on the possibility of restarting Israeli-Syrian negotiations, Mitchell discussed a settlement deal and prospects for regional peace with Defence Minister Ehud Barak in Tel Aviv.
Mitchell told reporters he has been urging Arab leaders "to take steps towards normalisation as gestures of their own to demonstrate that everyone in the region shares the vision of comprehensive peace that we share".
Barak has publicly raised the possibility of halting construction in settlements while allowing building projects under way to continue, as part of a deal in which Arab countries would take initial steps to normalise relations with Israel.
Arab moves towards commercial or diplomatic ties with Israel could help Netanyahu persuade partners in his right-leaning coalition to accept a compromise on settlements.
"I can tell you that we here are ready to take whatever reasonable effort to make it happen (regional peace) ... and of course, we bear in mind our vital interest but we understand there are needs of other partners as well," Barak said after meeting Mitchell.
The envoy was to see Abbas on Monday and Netanyahu on Tuesday.
Gates also plans talks in Israel. He was due to meet Netanyahu and Barak on Monday to discuss missile defence, Iran's nuclear ambitions and bilateral security issues, a senior U.S. defence official said.
Clinton annoyed Israel last week by saying the United States would cope with a nuclear Iran by arming its allies in the Gulf and extending a "defense umbrella" over the region.
A senior Israeli official said the United States should focus on preventing Iran from getting a nuclear weapon rather than talking as if this may be a fait accompli.
Iran says its nuclear program is aimed at generating electricity.
Netanyahu told reporters he would meet on Wednesday with Jones, whom he said would be heading a "senior team from the National Security Council, the State Department and the White House".
In a nod to Washington but stopping short of meeting its demands, Netanyahu has pledged not to build new settlements or expropriate additional territory in the West Bank, where Palestinians hope to build a state with East Jerusalem as its capital.
But he has said construction in settlements to accommodate the "natural growth" of their populations must continue. Palestinians say they fear settlements, deemed illegal by the World Court, could deny them a viable and contiguous state.
In Damascus, Mitchell said restarting talks between Israel and Syria was a "near-term goal" for Washington. He also called for Assad's support for a broad peace effort in the region.
Indirect talks between Syria and Israel, which were being mediated by Turkey, were suspended during the Israeli offensive on the Gaza Strip in December.
Turkey said this month it was ready to resume mediation of those talks. Syria has been seeking the return of the Golan Heights, territory that Israel captured in a 1967 war.
Syria remains under U.S. sanctions but Obama has decided to return a ambassador to Syria. Washington withdrew its envoy in 2005 to protest against the assassination in Beirut of Rafik al-Hariri, a Lebanese parliamentarian and former prime minister. (Additional reporting by Khaled Yacoub Oweis in Damascus) (For FACTBOX on Jewish settlements, click on [nLQ641147], for blogs and links on Israeli politics and other Israeli and Palestinian news, go to blogs.reuters.com/axismundi)