Israeli Prime Minister Benjamin Netanyahu, under US pressure, said he would accept a Palestinian state, a move welcomed by the United States and rejected by Palestinians who said his conditions won’t lead to peace.

A Palestinian state would have to be demilitarized and its establishment contingent on recognition of Israel as a Jewish homeland and international security guarantees, Netanyahu said.

Then “we will be ready in a future peace agreement to reach a solution where a demilitarized Palestinian state exists alongside the Jewish state,” the Israeli leader said in a speech at Bar Ilan University outside Tel Aviv.

Netanyahu had previously refrained from explicitly endorsing a Palestinian state. His address came 10 days after President Obama said the creation of a Palestinian state was the “only resolution” for the Arab-Israeli conflict and that he would become personally involved in peacemaking.

“Netanyahu is certainly responding to Obama’s insistence on a two-state solution and has now given the president something to work with,” Martin Indyk, US ambassador to Israel under President Bill Clinton, said in an e-mail.

Obama “welcomes the important step forward in Prime Minister Netanyahu’s speech,” White House Press Secretary Robert Gibbs said in an e-mailed statement.

“It is a step in the right direction,” Czech Foreign Minister Jan Kohout, speaking for the European Union’s presidency, told reporters in Luxembourg.

Nabil Abu Rudeina, a spokesman for Palestinian Authority President Mahmoud Abbas, said Netanyahu’s conditional acceptance of a state will “not lead to a just and comprehensive peace.”

The United States needs to put pressure on Netanyahu to be more flexible, Hani Habib, a political scientist at Al-Aqsa University in the Gaza Strip said in a phone interview. “If the US doesn’t carry out real actions on the ground, the whole region will deteriorate,” he said.

Obama has called for an end to all Jewish settlement building in the occupied West Bank. While Netanyahu said no new settlements will be built, he said that Jewish settlers have the right to a “normal life.” Netanyahu has supported construction within settlements to accommodate natural population growth.

This position “is not likely to be acceptable to President Obama because it undermines the negotiations” Indyk said.

The fate of east Jerusalem, which the Palestinians seek as the capital of their state and over which Israel has imposed its rule in a move never internationally recognized, isn’t up for negotiation, Netanyahu said.

Palestinian refugees, who fled their homes in the 1948 and 1967 Middle East wars, won’t be resettled inside Israel’s borders, he added.

“A fundamental prerequisite for ending the conflict is a public, binding and unequivocal Palestinian recognition of Israel as the nation state of the Jewish people,” Netanyahu said. “To vest this declaration with practical meaning there must also be a clear understanding that the Palestinian refugee problem will be resolved outside Israel’s borders.”

Demilitarization of the Palestinian state Netanyahu envisions as part of a final peace settlement must be guaranteed by the international community.

“To achieve peace we must ensure that Palestinians can’t bring in rockets and missiles, control air space or forge alliances with Iran or Hezbollah,” Netanyahu said.

Saeb Erakat, a senior Palestinian negotiator, said the speech fell short “in every single one of the benchmarks required of Israel in line with international law and existing agreements.”

Netanyahu’s address comes a day after Iran’s Mahmoud Ahmadinejad won a second presidential term, an electoral victory that Israeli Foreign Minister Avigdor Lieberman said increased the need for the international community to block Iran’s nuclear program and its support of terror groups.

“The Iranian threat looms large before us, as was further demonstrated yesterday,” Netanyahu said. “The great danger confronting Israel, the Middle East, the entire world and the human race, is the nexus between radical Islam and nuclear weapons.”

Iran has denied claims its nuclear program is aimed at building a nuclear weapon.

Yossi Alpher, who advised Labor Party leader and Defense Minister Ehud Barak when he was premier, said it was surprising that Netanyahu “didn’t dwell much on Iran despite the events of the last two days.”

That “was smart because he knows the US doesn’t want him to appear to be hiding behind the Iranian threat in order to avoid dealing forthrightly with the Palestinian issue,” Alpher said.  (Bloomberg)