In a bid to ease tensions with the new US administration, Israeli Prime Minister Benjamin Netanyahu has called for the creation of a limited Palestinian state for the first time, saying it would have to be disarmed.

“Israel cannot agree to a Palestinian state unless it gets guarantees it is demilitarised, “Netanyahu said in his much awaited policy speech.

“I call on you, our Palestinian neighbors, and to the leadership of the Palestinian Authority, Let us begin peace negotiations immediately, without preconditions, “the Israeli premier said adding, “Israel is committed to international agreements and expects all the other parties to fulfill their obligations as well.”

The hardliner Israeli premier has resisted agreeing a two-state solution to the Israel-Palestinian conflict all
through his political career and his veiled acceptance was couched under several conditions, including refusal to allow Palestinian refugees to settle in Israel and keeping united Jerusalem the capital of the Jewish state.

The address at Bar Ilan University, considered the bastion of Israeli right, came in the wake of US President Barack Obama’s insistence that Israel impose a complete freeze on West Bank settlement construction and recognise the two-state solution.

Netanyahu vowed that Israel would not build any new settlements and would refrain from expanding existing Israeli settlements in the West Bank but his government must be allowed to accommodate “natural growth” in population in these settlements.

The hawkish leader has so far been adamant that a settlement freeze is unfeasible and that he would concentrate on strengthening the Palestinian economy, rather than agreeing to their statehood.

The Prime Minister also reached out to Arab neighbouring countries offering to meet their leadership at any time to promote regional peace and to gain their contribution to the Palestinian economy.

Netanyahu reiterated that Israel has no desire to control the Palestinian people and declared that both nations should be able to live side by side in peace.

“We want both Israeli and Palestinian children to live without war,” he said adding, “We must ask ourselves – why has peace not yet arrived after 60 years?”

However, the Israeli premier also demanded that Palestinians must accept Israel as a Jewish state and cited the root of the regional conflict to “even moderate” Palestinian elements’ refusal to do so.

“When Palestinians are ready to recognise Israel as a Jewish state, we will be ready for a true final settlement,” Netanyahu stressed.

The speech failed to impress Palestinian leaders who denounced it as efforts to “sabotage” peace efforts.

“Netanyahu’s remarks have sabotaged all initiatives, paralysed all efforts being made and challenges the Palestinian, Arab and American positions,” said Nabil Abu Rdeineh, a close aide to Palestinian Authority (PA) President Mahmoud Abbas.

Reacting angrily to Netanyahu’s assertions that Palestinian refugees will not be allowed to settle in Israel and undivided Jerusalem will stay its capital, Rdeineh said that “this will not lead to complete and just peace”.

“His remarks are not enough and will not lead to a solution,” he stressed.

The aide to Abbas described Netanyahu’s setting of a condition of demilitarisation as a condition for Israel agreeing to a Palestinian state as “detail”.

“Our main demand is the end of the occupation and finding a fair solution for Palestinian refugees and halting settlements. Other details should be resolved in negotiations,” he said.

Analysts on Channel two television said that the Prime Minister tried to appease the US by agreeing to a two-state solution and his right-wing coalition partners by not budging on the three core issues of the conflict.

He may have managed to calm down tensions with close ally, the United States, but he certainly managed to infuriate the Israeli right wing supporters who oppose the creation of a Palestinian state in any form.