Israelis living under a cloud on Golan Heights

By Alistair Lyon, Special Correspondent

GOLAN HEIGHTS (Reuters) - Saddles off, the horses stand quietly on a hill on the Israeli-occupied Golan Heights, the sun gleaming on the blue waters of the Sea of Galilee below.

The trekkers back from riding in the tranquil countryside around Ramot ranch might well forget that this strategic, water-rich plateau was seized in war from Syria in 1967 -- and that its full return is the price Damascus demands for peace.

For Justine Peleg, who runs the ranch with her husband Uri, the chance that Israel might cede the Golan, which it annexed in 1981 to world condemnation, is a small but persistent cloud.

"It's always at the back of your mind, especially as someone who owns a business -- you wonder whether to keep building and reinvesting," the English-born Israeli said. "But it just sits there behind you, it doesn't stop you doing anything."

Israel and Syria, which came close to a peace deal in 2000, have held four rounds of indirect talks in Turkey since May, but neither side seems eager for face-to-face negotiations before a new U.S. president takes over and Israel finds fresh leadership.

Peleg has grown very fond of the 1,200 square km (460 square mile) Golan, a land of brown earth, black rocks and volcanic outcrops, where her husband fought as a paratrooper 41 years ago. She sees no reason why it should change hands again.

"As far as Israeli law is concerned, it is a part of Israel, like Tel Aviv or Haifa, so why are we even talking about considering giving it back?" she asked, sitting in her garden.

Her sentiments are widely shared among the 18,000 Israeli settlers in the Golan, living alongside about 20,000 Syrian Druze villagers, most of whom have refused Israeli citizenship.

MAKING WINE

"We are living here, and we believe we will continue to live here and make wine here," said Shalom Brayer, chief executive of the 25-year-old Golan Heights Winery, which produces about six million bottles a year in the small town of Katzrin.

Brayer is keen to distinguish Israeli settlers in the Golan from their more militant, religious counterparts in the West Bank, where he recognizes that Palestinians claim the same land.

"It's a tragedy there because there are two nations in one place," he said. "Here it was different. We never did something wrong to the Arabs because when we came here it was empty."

Syria says 153,000 Golan residents fled in the 1967 war, forming a displaced community that has grown to 600,000.

"When we started, we were pioneers. We came here with the government's blessing," said Brayer, who has spent 34 years in the Golan. "We planted orchards, vineyards, modern agriculture."

The "pioneering" days are over in an area where ski resorts, wineries and tourism now supplement fruit and cattle farming, shaping what the settlers hope will be a permanent reality.