Obama envoy tells Israel U.S. wants Palestinian state

By Jeffrey Heller and Adam Entous

JERUSALEM (Reuters) - Washington's visiting Middle East envoy vowed on Thursday to vigorously pursue the creation of a Palestinian state, setting the stage for possible conflict with Israel's new right-leaning government.

Prime Minister Benjamin Netanyahu has so far refused to commit Israel to restarting statehood talks and told President Barack Obama's envoy George Mitchell his government wanted the Palestinians to first recognize Israel as a Jewish state.

"Israel expects the Palestinians to first recognize Israel as a Jewish state before talking about two states for two peoples," a senior official in Netanyahu's office quoted the prime minister as telling Mitchell at a meeting in Tel Aviv.

Another Israeli official said Netanyahu saw Palestinian acceptance of Israel as a Jewish state as "a crucial element in moving forward with the political dialogue."

Senior Palestinian negotiator Saeb Erekat dismissed Netanyahu's demands as part of an effort by the two-week-old government to dodge commitments made by its predecessor to negotiate thorny issues such as borders, the future of Jerusalem and Palestinian refugees.

Palestinians have long rejected such explicit recognition of the Jewish nature of a state where one in five people is Arab.

In back-to-back meetings with Israeli leaders, Mitchell stressed Obama's commitment to the goal of a two-state solution, "in which a Palestinian state is living in peace alongside the Jewish state of Israel," to end the decades-old conflict.

"That is our objective. That is what we will pursue vigorously in the coming months," Mitchell said.

Netanyahu has been vague about any future peacemaking with the Palestinians, but ultranationalist Foreign Minister Avigdor Lieberman, who met Mitchell earlier in the day, has described negotiations launched at a 2007 conference in Annapolis, Maryland as at a "dead end."

Netanyahu's call for the Palestinians to recognize Israel as a Jewish state threw yet another hurdle in the way of U.S. efforts to revive Israeli-Palestinian peacemaking.

Mitchell, a former U.S. senator who mediated in the Northern Ireland peace process, planned to hold talks on Friday with Western-backed Palestinian President Mahmoud Abbas.

LIEBERMAN, WILD CARD

At a brief public appearance alongside Mitchell, Lieberman made no mention of a Palestinian state, saying only that his meeting with the U.S. envoy was "a great opportunity to exchange some ideas, and we spoke about really close cooperation."

Mitchell said that Lieberman told him about Israel's desire to "make economic improvements" in the West Bank.

Palestinian leaders have rejected any notion of an "economic peace" and have said U.S.-backed talks with Israel cannot resume until Netanyahu makes a commitment to statehood.