Rice pushes peace as Olmert visits U.S. under cloud

By Jeffrey Heller

WASHINGTON (Reuters) - U.S. Secretary of State Condoleezza Rice made clear on Tuesday Washington will keep pressing for an Israeli-Palestinian peace deal despite the corruption scandal dogging Israeli Prime Minister Ehud Olmert.

In a speech to a leading pro-Israel lobbying group, Rice also called for greater international pressure on Iran to halt its suspected nuclear weapons program, which Israel regards as a major strategic threat.

Olmert, who arrived in Washington on Tuesday at the start of a three-day visit, has rebuffed calls that he leave office over allegations that he took envelopes stuffed with cash from a Jewish-American businessman.

"The present opportunity is not perfect by any means," Rice told a policy conference of the American Israel Public Affairs Committee, without mentioning Olmert's political woes.

"But it is better than any other in several years and we need to seize it," she added. "We still believe that we have a chance to reach an agreement on the basic contours of a peaceful Palestinian state."

Olmert, who is to see President George W. Bush at the White House on Wednesday, has described the $150,000 in cash and unpaid loans he received from the businessman as legitimate election campaign contributions. Both men deny wrongdoing.

U.S. officials acknowledge the uncertainty about Olmert's future had made their task of trying to strike some kind of an outline peace deal this year even harder.

The political crisis could trigger an early Israeli election and derail the peace talks, Israeli, Palestinian and Western officials say. Olmert says he will resign if indicted.

JEWISH SETTLEMENT GROWTH

Olmert met in Jerusalem with Palestinian President Mahmoud Abbas on Monday. Abbas has himself been politically weakened by the takeover of the Gaza Strip by Hamas Islamists last June.

Abbas protested against fresh Jewish settlement growth near Jerusalem in Monday's talks and a Palestinian official said this was undermining the peace talks.

"The U.S. administration should tell Israel to live up to its obligations," Maen Areikat of the Palestinian Liberation Organization's Negotiations Affairs Department said during a visit to Washington. "You cannot continue talking and building at the same time."

Israeli officials said Olmert's strategy was to push ahead with negotiations with the Palestinians, as well as indirect talks with Syria, as if nothing has changed, in the hope the police investigation does not end in charges against him.

"This process will continue," Olmert's spokesman, Mark Regev said of the talks with the Palestinians. The talks have shown few visible signs of progress, leading to deep skepticism among Israelis and Palestinians that they are going anywhere.

White House spokeswoman Dana Perino acknowledged that the corruption scandal has garnered heavy media attention, but said, "our focus hasn't been on that ... President Bush has to keep his focus on the big picture."