JERUSALEM: Israelis and Palestinians are setting their sights on talks to finalise the status of the West Bank based on an Israeli pullout from most of the occupied territory after seven years of stalemate.

Israeli Prime Minister Ehud Olmert and Palestinian president Mahmud Abbas, faced with heightened foreign diplomatic overtures, have started to talk of peace despite the huge gaps between them and political difficulties at home.

In the first such public comments from a top member of the current Israeli government, Deputy Prime Minister Haim Ramon backed a withdrawal from most of the occupied territory as part of a peace agreement with the Palestinians.

It was in Israel's interest to “leave the majority of the territory of Judea and Samaria while maintaining the large settlement blocs,” Ramon told public radio in an interview on Friday.

“We should not insist on keeping territories when their continued occupation threatens our national existence and harms our position in the world,” said Ramon, one of Olmert's closest colleagues.

Olmert's centrist Kadima party was elected in 2006 on a ticket of withdrawing from most of the West Bank while effectively annexing the largest Jewish settlements, but the project was shelved after the Lebanon war.

“The whole idea of unilateralism was based on the fact that we had no partner and now we have a partner,” said Ramon, referring to Western-backed Palestinian president Mahmud Abbas and prime minister Salam Fayyad.

Israel withdrew unilaterally from the Gaza Strip in September 2005, as it did from southern Lebanon in 2000 — decisions many Israelis now regard as flawed given the subsequent flare up of conflicts with both territories.

Ramon was speaking amid recent diplomatic overtures designed to revitalise peace talks that have been defunct for the past seven years and to bolster Abbas since Hamas — considered terrorists by Israel — seized control of Gaza.

In extracts from an Israeli newspaper interview published in full on Friday, Abbas said US President George Bush is looking to reach a final status on Israeli-Palestinian agreement in the coming year before he leaves office.

On Wednesday, Olmert said “serious” talks had begun with Abbas “on a peace process and questions which can allow a Palestinian state to be established.” The Haaretz newspaper said he was offering to hold negotiations to agree principles to establish a Palestinian state with Jerusalem as its capital before more sensitive diplomatic issues are tackled.

He would be likely to offer establishing a Palestinian state in Gaza and about 90 per cent of the occupied West Bank, with territorial compensation in exchange for retaining large Jewish settlement blocs, Haaretz said.

“Ramon's comments are encouraging. It confirms that Olmert himself is evolving,” said Israeli analyst Yossi Alpher, believing the prime minister is hoping to seize upon a new agenda in order to reverse abysmal opinion polls.

“Apparently he's looking to reach an agreement in principle with the Palestinians... which would allow him to reverse his decline in popularity by offering a vision of peace in the event of early elections,” he added.

Palestinian analyst Mahdi Abdulhadi put recent developments in the context of growing foreign diplomacy eager to redress “the inability of Israeli or Palestinian parties to reach an agreement.” Earlier this week, the Egyptian and Jordanian foreign ministers visited Israel to tout a peace plan first mooted by Saudi Arabia in 2002, and said they were encouraged by the Israeli response.

That blueprint offers Israel normalisation of ties with Arab nations in exchange for full withdrawal from Arab land occupied since 1967, the creation of a Palestinian state and a return of refugees.

US Secretary of State Condoleezza Rice is also due in Jerusalem and Ramallah next week, allowing her to prepare for international Middle East peace talks which Bush has announced for the autumn.—AFP