Israeli bribery scandal clouds Bush visit

By Matt Spetalnick

WASHINGTON (Reuters) - When President George W. Bush accepted Prime Minister Ehud Olmert's invitation to Israel's 60th birthday celebration, there was little reason to think his visit would do much to advance Middle East peace prospects.

But with a bribery scandal now threatening to topple Olmert and disrupt fragile U.S.-sponsored talks with the Palestinians, the chances for progress are looking worse than ever.

Already facing deep skepticism over his effort to secure a peace deal before leaving office in January, Bush can ill afford to lose Olmert, Israel's chief negotiating partner with Palestinian President Mahmoud Abbas.

Israel's political crisis has cast a cloud over festivities marking six decades since the founding of the Jewish state and all but guaranteed that Bush's May 14-16 visit will be more of symbolism than of substance.

"It's highly unlikely Bush will get any real movement," said Haim Malka, a Middle East expert at the Center for Strategic and International Studies. "The constraints are numerous ... and Olmert's troubles add new complications."

Olmert admitted on Thursday taking cash from a U.S. businessman. He denied, however, that he had been bribed and resisted widespread calls to resign, but said he would step down if formally indicted.

If Olmert goes and his shaky coalition collapses, an Israeli election would make Bush's end-of-term deadline for a peace treaty, including an agreement on Palestinian statehood, look even less attainable.

Even if Olmert can weather the political storm, it will further weaken his hold on power and leave him with little room to maneuver in talks with the Palestinians.

The White House has played down the fallout, insisting Olmert is not the only Israeli leader committed to the peace process. His likely successor, Foreign Minister Tzipi Livni, has worked closely with Washington and the Palestinians.

SEEKING LEGACY BEYOND IRAQ

Bush still intends to make the trip, his second to the region since a U.S.-hosted conference in Annapolis, Maryland, in November, where Olmert and Abbas pledged to try to forge a peace deal by the end of the year.

Since then, talks have bogged down over Israeli settlement expansion plans in the occupied West Bank and violence in and around the Gaza Strip, where Hamas cross-border rocket fire has drawn a tough Israeli military response.

Once wary of a hands-on approach to Israeli-Palestinian peacemaking, Bush now is looking for a foreign policy legacy that encompasses more than the unpopular war in Iraq.

His critics view it as too little, too late, after years of neglecting the conflict, and say he is still unwilling to bring Washington's full diplomatic weight to bear.

Bush insists he can succeed where his predecessors failed. "The president's theory ... is that if the Palestinian Authority and the Israelis can come to agreement for a framework for a two-state solution and for the outlines of a Palestinian state, that will open the door for peace," Stephen Hadley, Bush's national security adviser, told reporters.