AMY TEIBEL, Associated Press
WASHINGTON -- Israeli Prime Minister Benjamin Netanyahu told the U.S. Congress on Tuesday that he was willing to make "painful compromises" for peace with the Palestinians, for the first time explicitly saying some West Bank settlements would find themselves outside Israel's final borders.
But he tacked on a list of oft-stated conditions that have been unacceptable to the Palestinians. A senior Palestinian official immediately rejected Netanyahu's peace outline as a "declaration of war."
Speaking before a warmly receptive joint meeting of Congress that showered him with more than two dozen sustained standing ovations, Netanyahu said Israel wants and needs peace but repeated his flat rejection of a return to what he called the "indefensible" borders that Israel had before the 1967 Mideast war.
He also restated Israel's refusal to repatriate millions of Palestinian refugees and their families to homes in Israel that they lost in fighting over the Jewish state's 1948 creation.
Netanyahu maintained anew that contested Jerusalem could not be shared with the Palestinians, who want the eastern sector of the holy city as capital of their hoped-for state. And he insisted that Israel maintain a long-term military presence on what would be the eastern border of a Palestinian state.
"Israel will never give up its quest for peace," Netanyahu said, adding that he is "willing to make painful compromises to achieve this historic peace."
But he that said Israel would not negotiate with terrorists and urged Palestinian President Mahmoud Abbas to rip up a power-sharing agreement that his moderate Fatah faction has signed with the militant group Hamas, which does not recognize Israel's right to exist.
In the West Bank, Nabil Shaath, a senior Palestinian official, called Netanyahu's speech "a declaration of war against the Palestinians."
"This is an escalation and unfortunately, it received a standing ovation," he said, noting that Netanyahu had rejected all key Palestinian demands on key issues like future borders, the competing claims of Jersualem and the fate of refugees.
Israel, which enjoys strong bipartisan backing in Congress, has been rattled by President Barack Obama's support for drawing the future borders of a Palestinian state and a Jewish state on the basis of Israel's pre-1967 war frontiers.
Netanyahu had repeatedly challenged the president's position, ignoring Obama's assertion that the territorial markers could be adjusted through mutually agreed land swaps. The Palestinians accept that principle, which would allow Israel to retain major West Bank settlement blocs and help to assure its security.
In his speech before Congress, Netanyahu backed off from his dispute with Obama, acknowledging that the president has not called for a return to the exact borders Israel held before capturing east Jerusalem, the West Bank and Gaza Strip in the 1967 Mideast war.
Obama had, in large part, staked his reputation in the Muslim world on finding solution to the Arab-Israeli conflict. But he has not been able to draw Israelis and Palestinians back to the bargaining table for sustained talks, and the Palestinians are refusing to come back as long as Israeli settlement construction continues on lands they want for a future state.
In lieu of negotiations, the Palestinians are campaigning to obtain U.N. recognition of Palestinian statehood when the General Assembly meets in September. Such recognition wouldn't hand them a state in practice, but it would make things even tougher for Israel internationally.
The U.S. also opposes a unilateral declaration of Palestinian statehood and is holding out for a negotiated compromise.
Netanyahu congratulated the United States for killing al Qaida leader Osama bin Laden, wishing him "good riddance," and dismissed early shouts from an anti-Israel protester as evidence that freedom of speech is alive and well in the United States and is respected in both countries.
Associated Press Writer Matthew Lee contributed to this story.