Rice: Palestinian state good for Israel

Speaking to reporters en route from Saudi Arabia, Rice said she would use a speech later on Sunday to demonstrate that change was taking place rapidly in other parts of the Middle East and Israel and the Palestinians should follow suit.

"I will talk about the changed context in the Middle East," she said, referring to Libya's decision to abandon weapons of mass destruction, Syria's withdrawal from Lebanon, the ousting of Saddam Hussein in Iraq, and tentative reforms in Saudi Arabia and Egypt.

She spoke of the changed environment in Israel and the Palestinian territories, with the death of Palestinian leader Yasser Arafat a year ago and Israel's successful withdrawal from the occupied Gaza Strip in September.

"A Palestinian state would indeed enhance Israeli security," Rice said. Asked what she would request of the two sides during her trip, Rice said the Palestinians needed to tackle militants ahead of January's parliamentary election and said a democratic state could not be built when organisations remained armed.

"The need to deal with the infrastructure of terrorism is a road map obligation," she said referring to a U.S.-backed peace plan setting out steps for a Palestinian state alongside a

secure Israel.

Rice said she would also make clear to the Israelis that they had to be aware of the consequences of their reaction. "The Israelis have very important road map obligations and we will

talk about that, too," she said.

"Israel should do nothing to prejudge final status or the outlines of a final settlement. The parties have now had the habit of cooperation in the Gaza withdrawal and it is in our hope that they are going to continue to build on that."

Israel has failed to meet its own road map commitment to freeze Jewish settlement building in the West Bank.

New Political Landscape

Rice's trip to Israel coincides with political change there and one senior State Department official said this could make it harder for the United States to push the peace agenda.

Amir Peretz, a socialist and head of Israel's workers union, beat veteran peacemaker Shimon Peres last week to become leader of the left-wing Labour party, which joined Sharon's coalition earlier this year to push forward his Gaza pullout plan.

'Bargaining period'

"We may be walking into a political bargaining period. We are just not sure what all of this means yet," Said a senior U.S. State Department official, who declined to be named. Peretz has said he would press Sharon this week to call for Israeli parliamentary elections as early as March and the Americans fear this will further dampen peace hopes which have been stalled by violence.

"What we don't want here is to be kept in a holding pattern," added the senior U.S. Official.

Rice also wants to resolve access problems into Gaza which the United States says is holding up economic development there since Israel's withdrawal.

"There are a few details, a couple of sticking points to be worked out on this access issue, but we have been making progress," said an official travelling with Rice. But he said Rice would not push for a "Quick fix" and Israel's security could not be jeopardised. "It's more important

to get this right rather than doing it too quickly," Said the

official.

Former World Bank president and special Middle East envoy James Wolfensohn is in the region trying to iron out these problems and one U.S. Official said he was close to a breakthrough. "But he's not quite there yet."

During her visit to Jerusalem, Rice will address the Saban Forum of the U.S.-based Brookings Institution and is also set to attend a memorial to mark the 10th anniversary of the assassination of former Israeli Prime Minister Yitzhak Rabin.

After visiting Israel, she will make a stop in Jordan to pay her respects after last week's hotel bombings which killed 57 people. She then travels to Asia where she will join U.S. President George W. Bush for a meeting of APEC leaders.