Diplomats amend U.N. racism text to draw in West

* Draft removes references to Israel, defamation of religion

* Text goes in "right direction", EU diplomat says

GENEVA, March 17 (Reuters) - States preparing for a highly sensitive U.N. racism conference have removed references to Israel and religious defamation from its draft declaration, potentially clearing the way for Western states to attend.

The amended text, circulated on Tuesday, followed a European Union threat to boycott next month's "Durban II" conference in Geneva unless the declaration wording was changed to keep the meeting from becoming an anti-Semitic forum.

Israel and Canada have already withdrawn from the World Conference against Racism, scheduled for April 20-24, amid fears that Arab nations will use it to attack Israel. The United States and Australia said they planned to do the same unless the wording of the previous draft was altered radically.

The latest draft declaration, a compromise 17-page text issued by Russian working group chairman Yuri Boychenko after private consultations, omits any reference to the Middle East conflict as well as defamation of religion.

"The document contains no reference to Israel, the Middle East or defamation of religion," said one United Nations source.

"The text goes in the right direction," an EU diplomat said.

In Paris, French Foreign Minister Bernard Kouchner, responding to questions in parliament, said that "it would seem that precise improvements have been made."

The EU's "red lines" that would keep it from participating in the forthcoming Geneva gathering were clear, he said in a text made available by the French diplomatic mission in Geneva.

These included stigmatisation of a country, the lack of a possibility to criticise a religion, discrimination against women, discrimination against people on the basis of their sexuality, as well as demands for reparations for slavery.

The 27-member EU bloc would have a "common position" on whether to participate in the meeting, Kouchner said. Italy broke ranks earlier this month when it said it would not attend unless the document's wording was altered.

The United States and Israel walked out of the first U.N. conference on racism in Durban, South Africa, in 2001, to protest against efforts to include passages in the text comparing Zionism to racism. The final document issued at the time, adopted by consenus, omitted all such references.

Diplomats said memories of street marches targeting Jews at the first conference remain strong and fears of a repeat have grown after protests in Europe over Israel's war against Palestinian militants in Gaza.

The defamation of religion issue has been pushed hard at the U.N. in both New York and Geneva in recent years by members of the 57-nation Organisation of the Islamic Conference.

Critics say that efforts to ban defamation are primarily aimed at silencing criticism of the authorities in Islamic countries, including their treatment of women and followers of other religions. (Editing by Laura MacInnis and Richard Balmforth)