Netanyahu accepts limited Palestinian state

updated 7:25 p.m. ET June 14, 2009

JERUSALEM - Israeli Prime Minister Benjamin Netanyahu endorsed a Palestinian state beside Israel for the first time on Sunday, reversing himself under U.S. pressure, but saying the Palestinians would have to lay down arms, a condition they swiftly rejected.

A week after President Barack Obama's address to the Muslim world, Netanyahu said the Palestinian state would also have to recognize Israel as the Jewish state — essentially saying Palestinian refugees must give up the goal of returning to Israel.

With those conditions, he said, he could accept "a demilitarized Palestinian state alongside the Jewish state."

The West Bank-based Palestinian government dismissed the proposal.

"Netanyahu's speech closed the door to permanent status negotiations," senior Palestinian official Saeb Erekat said. "We ask the world not to be fooled by his use of the term Palestinian state because he qualified it. He declared Jerusalem the capital of Israel, said refugees would not be negotiated and that settlements would remain."

Netanyahu, in an address seen as his response to Obama, refused to heed the U.S. call for an immediate freeze of construction on lands Palestinians claim for their future state. He also said the holy city of Jerusalem must remain under Israeli sovereignty.

‘Important step forward’
The White House said Obama welcomed the speech as an "important step forward."

Netanyahu's address was a dramatic transformation for a man who was raised on a fiercely nationalistic ideology and has spent a two-decade political career criticizing peace efforts.

"I call on you, our Palestinian neighbors, and to the leadership of the Palestinian Authority: Let us begin peace negotiations immediately, without preconditions," he said, calling on the wider Arab world to work with him. "Let's make peace. I am willing to meet with you any time any place — in Damascus, Riyadh, Beirut and in Jerusalem."

Since assuming office in March, Netanyahu has been caught between American demands to begin peace talks with the Palestinians and the constraints of a hardline coalition. On Sunday, he appeared to favor Israel's all-important relationship with the U.S. at the risk of destabilizing his government.

But his call for establishing a Palestinian state was greeted with lukewarm applause among the audience at Bar-Ilan University, known as a bastion of the Israeli right-wing establishment.

As Netanyahu spoke, two small groups of protesters demonstrated at the university's entrance.

Several dozen hard-liners held up posters showing Obama wearing an Arab headdress and shouted slogans against giving up West Bank territory. Across from them, a few dozen dovish Israelis and foreign backers chanted slogans including "two states for two peoples" and "stop the occupation."

Police kept the two groups apart.

The Palestinians demand all of the West Bank as part of a future state, with east Jerusalem as their capital. Israel captured both areas in the 1967 Mideast war.

‘Birthplace of the Jewish people’
Netanyahu, leader of the hardline Likud Party, has always resisted withdrawing from these lands, for both security and ideological reasons. In his speech, he repeatedly made references to Judaism's connection to the biblical Land of Israel.

"Our right to form our sovereign state here in the land of Israel stems from one simple fact. The Land of Israel is the birthplace of the Jewish people," he said.

But Netanyahu also said that Israel must recognize that millions of Palestinians live in the West Bank, and continued control over these people is undesirable. "In my vision, there are two free peoples living side by side each with each other, each with its own flag and national anthem," he said.

Netanyahu has said he fears the West Bank could follow the path of the Gaza Strip — which the Palestinians also claim for their future state. Israel withdrew from Gaza in 2005, and Hamas militants now control the area, often firing rockets into southern Israel.

"In any peace agreement, the territory under Palestinian control must be disarmed, with solid security guarantees for Israel," he said.

"If we get this guarantee for demilitarization and necessary security arrangements for Israel, and if the Palestinians recognize Israel as the state of the Jewish people, we will be willing in a real peace agreement to reach a solution of a demilitarized Palestinian state alongside the Jewish state," he said.

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