Speaking to foreign correspondents in Jerusalem, Netanyahu said the only time the Iranians stopped their nuclear development was in 2003, when they thought they were threatened with a military strike.
The PM said the Iranians would cancel their nuclear program only "if they thought they were facing a credible military option at the end of the tunnel."
"If there is credible military option you won't need to use it," he said.
The Israeli premier also told the foreign correspondents that only his government can ensure the support of the Israeli people for a peace deal with the Palestinians.
Netanyahu appealed for direct negotiations with the Palestinians until an agreement is reached. He expressed pessimism, charging that the Palestinians have avoided peace talks.
"You want to negotiate peace, sit down and negotiate," he said. "There is no other way to achieve peace."
'Maintain presence in Jordan Valley'
Netanyahu, who heads a hawkish government, insisted that his coalition partners would not prevent a peace accord. Also, he said, "I believe that if I bring a peace agreement ... I will bring the support of the Israeli public." He added, "I'm the only prime minister who can deliver that. But the Palestinians are walking away from that."
Palestinians have said they will not resume peace talks unless Israel halts construction in West Bank settlements and east Jerusalem, lands the Palestinians claim for a state.
Asked about the construction of a new Jewish neighborhood in east Jerusalem on the site of the demolished Shepherd Hotel, which drew harsh criticism from the international community, Netanyahu said the land is privately-owned and that "this is a free country."
The PM said he was fumed over the rabbis' letter urging Jews not to rent or sell property to Arabs, but mentioned that the Palestinian government in Ramallah sentences people to death for selling real estate to Jews. Netanyahu said Israel safeguards the civil rights of all its citizens.
The PM also said Tuesday that Israel must maintain a presence in the Jordan Valley, the eastern edge of the West Bank. Palestinians oppose that.
He added that extremists took over south Lebanon and Gaza after Israel withdrew, and "we need to have some safeguards that we don't repeat this a third time."
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