WASHINGTON, March 30: The world's major nations should start a trust fund to spur economic and political reforms in the Middle East, in line with US aims for greater democracy in the region, the top US senator on foreign affairs proposed on Monday.

Richard Lugar, an Indiana Republican who chairs the Senate Foreign Relations Committee, said the Group of Eight nations at their June summit should outline a plan to encourage Middle Eastern countries to break what he said was their isolation and ease poverty that may breed terrorism.

Lugar said in remarks prepared for delivery to the Brookings Institution that his proposed G8 trust could be modelled on the Global Fund to Fight AIDS, and on a Bush administration foreign aid programme that rewards countries that make economic and political reforms.

The trust would "unite the G8 countries with donor countries in the greater Middle East in a quest for political, economic, and educational modernization," he said.

The Group of Eight consists of the Group of Seven major industrialized nations - the United States, Britain, France, Germany, Italy, Japan and Canada - plus Russia.

Wealthy Mideast countries such as Saudi Arabia should also contribute to the fund, "to invest in their own futures and take a stake in the trust's success," Lugar said.

The trust should be structured to respect Islamic financial principles and be sensitive to the region's cultural concerns, he said. "Vigorous two-way interaction between donors and recipients is vital," he said. "Change cannot be imposed from the outside."

Lugar said his proposal is similar to a Bush administration Mideast economic initiative, which he said has met resistance from many Arab countries that view it as an attempt to impose western values.

But Lugar said that in contrast to a development bank as proposed by Mr Bush, the trust could conform to Islamic financial principles and address needs identified by the recipient countries themselves.

The senator also called for expanding the "quartet" group involved in the Israeli-Palestinian peace process, by adding Egypt and Saudi Arabia to the current membership of Russia, the European Union, the United States and the United Nations. -Reuters