*Obama to push two-state solution to conflict
*Common ground seen on Iran nuclear issue
*Restarting Israeli-Syrian peace talks on agenda
By Matt Spetalnick
WASHINGTON, May 16 Days before a White House summit, the Obama administration signaled on Saturday that the U.S. president would press Israel's new government to endorse Palestinian statehood and halt settlement expansion.
But senior U.S. officials downplayed prospects of a confrontation between President Barack Obama and Israeli Prime Minister Benjamin Netanyahu on Monday as they grapple with rare differences between Washington and its close ally.
"The president does not believe it's going in a bad direction," one Obama aide told reporters when asked about the refusal so far by Netanyahu's right-leaning government to embrace a two-state solution to the Middle East conflict.
Administration officials said Obama would push that principle, the cornerstone of U.S. Middle East policy for years, in his talks with Netanyahu, which are aimed at reviving the stalled peace process.
"Two states living side by side in peace and security -- my guess is they'll discuss that, and it's an issue they'll continue to work through," an official said.
Obama, who has promised to make Israeli-Palestinian peacemaking a high priority since taking office in January, will also stress U.S. opposition to continued construction of Jewish settlements on occupied land in the West Bank.
"The Israelis have obligations related to settlements and outposts," an official said. "It will certainly be a topic for them to discuss."
Netanyahu has resisted calls to freeze settlement expansion on land Israel captured in the 1967 Arab-Israeli war. The international community considers the settlements illegal, a position disputed by Israel.
COMMON GROUND ON IRAN?
Obama, who meets Palestinian President Mahmoud Abbas on May 28, will also urge the Palestinians to fulfill "obligations related to security and terrorism," a senior official said.
The 2003 "road map," sponsored by the Bush administration but widely ignored by both sides, called on Israel to halt settlement building and dismantle smaller unauthorized settler outposts, and required the Palestinians to rein in militants.
Obama and Netanyahu are likely to find more common ground on Iran, which both countries accuse of trying to develop nuclear weapons. Tehran insists its nuclear program is for civilian electricity generation.
But Israel, believed to be the only nuclear-armed country in the Middle East, is somewhat wary of Obama's efforts to engage Iran diplomatically, and Israeli officials have not ruled out military strikes if diplomacy fails.
U.S. officials brushed aside such concerns, but an Obama aide said the president was "aware of the urgency of the matter" of curbing Iran's nuclear defiance.
Obama and Netanyahu will also talk about restarting Israeli-Syrian peace talks under Turkish auspices, officials said. Netanyahu has been cool to the idea given Syria's demand for a return of the Israeli-occupied Golan Heights.
An administration source acknowledged Obama had discussed with Jordanian King Abdullah last month the possibility of broadening an Arab peace initiative with Israel. Abdullah told the Times of London this week that Obama wanted to promote a peace plan involving all Muslim countries.
But the U.S. official said the Obama administration wants to first complete this round of one-on-one talks, including with Abbas and Egyptian President Hosni Mubarak next week, before determining "the best way to move forward." (Reporting by Matt Spetalnick; Editing by Paul Simao)