WASHINGTON - President Barack Obama met Prime Minister Benjamin Netanyahu Friday as a new U.S. push for Middle East peace opened one of the deepest divides in years in relations between the United States and close ally Israel.
Netanyahu arrived at the White House a day after Obama endorsed a long-standing Palestinian demand on the borders of its future state, drawing an angry response from Israel that he was out of the touch with the reality of the long-running conflict.
Obama embraced the Palestinian view that the state they seek in the occupied West Bank and Gaza Strip should largely be drawn along lines that existed before the 1967 war in which Israel captured those territories and East Jerusalem.
The right-wing Netanyahu, who has had strained relations with Obama, reacted by saying that this could leave Israel with borders that were "indefensible."
The brewing crisis in U.S.-Israeli relations dimmed even further the prospect for resuming peace talks that collapsed late last year when Palestinians walked away in a dispute over Israeli settlement building in the West Bank.
"There is a feeling that Washington does not understand the reality, doesn't understand what we face," an official on board the plane taking Netanyahu to Washington told reporters.
Asked why he gave such a strong rebuttal to Obama's remarks in a policy speech on Middle East political upheaval, Netanyahu told reporters on board his plane: "There are things that can't be swept under the carpet."
Israel also has underlined its position by announcing the approval of plans to build 1,550 housing units in two Jewish settlements on annexed West Bank land around Jerusalem.
Obama's first outright declaration of his stance on the contested issue of borders could help ease doubts in the Arab world about his commitment to acting as an even-handed broker.
But in line with Netanyahu's stance, Obama voiced opposition to a Palestinian plan to seek U.N. recognition of statehood in September in the absence of renewed peace talks.
The Democratic president quickly came under fire from Republican critics, who accused him of betraying Israel, the closest U.S. ally in the region. Pushing Netanyahu risks alienating the Jewish state's base of support among the U.S. public and in Congress as Obama seeks re-election in 2012.
Obama, in his speech on Thursday, laid down his clearest markers yet on the compromises he believes Israel and the Palestinians must make to resolve a conflict that has long been seen as source of Middle East tension.
But he did not present a formal U.S. peace plan or any timetable for a deal he had once promised to clinch by September.
A round of talks brokered by Washington at Obama's initiative collapsed last year when Netanyahu refused to extend a moratorium on Jewish settlement building in the occupied West Bank and Palestinian President Mahmoud Abbas refused to carry on negotiations.
Israeli officials appeared especially taken aback by Obama's blunt language, including criticism of "settlement activity" and continued occupation of Arab lands.
"The viability of a Palestinian state cannot come at the expense of Israel's existence," Netanyahu said earlier.
He said he expected to hear "a reaffirmation from President Obama of U.S. commitments made to Israel in 2004" -- an allusion to a letter by then-president George W. Bush suggesting the Jewish state may keep big settlement blocs under a peace pact.
Despite the tensions, Obama carved out three hours for Netanyahu on Friday, including a working lunch.
HISTORY OF TENSION
In March last year, Israel angered Washington when an announcement of plans to build hundreds of dwellings in a settlement was made during a visit by Vice President Joe Biden.
Shortly afterward, Netanyahu was left cooling his heels while Obama went to the White House residence for dinner with his family, widely seen in Israel as a snub.
In Thursday's speech, Obama said: "We believe the borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps" of land.
While this has long been the private view in Washington, Obama went further than U.S. officials have gone in the recent past, when they described such a solution as a Palestinian aspiration but did not embrace it as their own.
Agreed swaps would allow Israel to keep settlements in the West Bank in return for giving the Palestinians other land.
Some Israeli commentators said Netanyahu might have hinted at some room for maneuver on the issue in a speech to parliament, the Knesset, on Monday.
They said his insistence that Israel must retain "the settlement blocs," the first time he has used that phrase, could suggest a willingness to evacuate small, isolated settlements.
To reassure Israelis, Obama recommitted to Israel's security and said any future Palestinian state must be "non-militarised," something Netanyahu has demanded.
But he warned Israel: "The dream of a Jewish and democratic state cannot be fulfilled with permanent occupation."
Obama also delivered messages that will be hard for the Palestinians to swallow, suggesting that they have a lot of explaining to do about a reconciliation deal with Hamas, the Islamist group that runs Gaza, which the United States regards as a terrorist group.
Abbas welcomed Obama's efforts to renew negotiations, and made plans to convene an "emergency" session of Palestinian and Arab officials to weigh further steps, a senior aide said.
But he did not comment on Obama's firm rejection of a Palestinian drive to seek recognition of their statehood at the annual meeting of the U.N. General Assembly in September.
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