WASHINGTON, July 16: US President George W. Bush on Monday proposed an international conference for reviving the Middle East peace process which will include Israel, the Palestinian Authority, and some Arab states.

In a nationally televised address, Mr Bush offered a carrot and stick approach, mixing generous financial assistance with a warning for the Palestinians to stay away from the militant Hamas group.

Siding with Hamas “would crush the possibility of a Palestinian state,” he said.

“This is a moment of clarity for all Palestinians. And now comes a moment of choice. The alternatives before the Palestinian people are stark,” he said. “There is the vision of Hamas … with murderers in black masks, and summary executions, and men thrown to their death from rooftops,” he added.

“There’s another option … it is the vision of President Abbas and Prime Minister Fayyad … it's the vision of a peaceful state called Palestine as a homeland for the Palestinian people.”

Bush on Monday urged Arab nations which have still not made peace with Israel to open a dialogue “ending the fiction that Israel does not exist.”

“Arab nations should also take an active part in promoting peace negotiations,” Mr Bush said.

Arab nations could help the process by ending the fiction that Israel does not exist, stopping the incitement of hatred in their official media, and sending cabinet level visitors to Israel.

To sweeten his call to the Palestinians to support Mr Abbas, President Bush also announced more than $190 million in US assistance for the Palestinians, including funds for humanitarian relief in Gaza.

He also authorised the US Overseas Private Investment Corporation to join in a programme that will help generate $228 million in lending to Palestinian businesses.

“Today I announce our intention to make a direct contribution of $80 million to help Palestinians reform their security services, a vital effort they're undertaking with the guidance of American General Keith Dayton,” he said. In another move to win over the Palestinians, Mr Bush called on Israel to remove unauthorised Jewish outposts in Palestinian territory and to end settlement expansion.

The United States and Israel are seeking to bolster Mr Abbas and his government following Hamas’s violent take-over of the Gaza Strip last month.