Allies warn Bush that stability in Iraq demands Arab-Israeli deal

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President Bush yesterday was bluntly told by European and Arab allies alike that a serious new push for a Palestinian-Israeli peace solution was vital if his vision of a stable Iraq at the heart of a reformed Middle East were to have any chance of success.

President Bush yesterday was bluntly told by European and Arab allies alike that a serious new push for a Palestinian-Israeli peace solution was vital if his vision of a stable Iraq at the heart of a reformed Middle East were to have any chance of success.

Boosted by the unanimous United Nations vote on sovereignty, Mr Bush used the first day of the G8 summit here to try and advance his agenda for Iraq, seeking to widen the role of Nato, gain relief for Baghdad's debt, and launch a much-touted initiative to promote democracy in the Middle East and the Islamic world.

But the Palestinian-Israeli conflict quickly leapt to the centre of proceedings, as Tony Blair attempted to secure a US commitment to revitalise the virtually moribund "road map" towards a comprehensive settlement. President Jacques Chirac of France - the fiercest critic of the 2003 invasion of Iraq - warned that "real progress" toward a peace deal was a "precondition" of any successful attempt at reform of the region.

But despite some nods of assent, there was little sign that Washington has agreed to a major rethink of its Middle Eastern policies, and its embrace of Israeli Prime Minister Ariel Sharon's controversial plan to withdraw from Gaza.

This latest annual gathering of the G8 powers, at the exclusive and massively guarded Sea Island resort, takes place in a much improved atmosphere from its predecessor a year ago, in the angry aftermath of the invasion of Iraq, which had split the Security Council and caused the worst rift in trans-atlantic relations in decades.

The recommended attire was 'business casual,' as a sports-shirted Mr Bush drove Mr Blair to their breakfast meeting in a new model fuel-efficient golf buggy, painted with the stars and stripes. Most leaders chose to go without ties. M. Chirac alone wore a formal suit and tie.

And the political content for the leaders - from France, the US, Britain, Russia, Italy, Japan, Canada and Germany - is also much more relaxed this time. The priority is mending fences, rather than rubbing salt into old Iraq wounds, and Monday's unanimous UN vote has given the occasion an ideal send-off.

However each of the main US aims is likely to run into difficulties. Cancellation of the $120bn of foreign debt run up by Saddam Hussein has been resolutely opposed by France, which argues that Iraq should not be treated differently from other, and even poorer, countries in the developing world. Moreover M. Chirac declared yesterday that this was not the time for Nato to become more involved in Iraq.

But the biggest disappointment may prove to be the so called "Broader Middle East" initiative, even as the G8 opens its doors for the first time to a group of Middle Eastern and Islamic leaders, including the new Iraqi President, Ghazi al-Yawer.

From highly ambitious origins, the scheme - intended to throw the collective weight of the G8 behind a bid to foster economic reform and democracy in the region - has been steadily diluted since it was first floated earlier this year, amid a chorus of objections and criticism, from Europe as well as from sections of the Arab world.

Once modelled on the 1975 Helsinki accords which imposed human rights obligations on Communist Europe, the latest version is non-binding in any way, and is focussed on economic and educational issues.

King Abdullah of Jordan, President Karzai of Afghanistan and the Turkish Prime Minister were among those in attendance. But Saudi Arabia and Egypt - two countries crucial for the initiative - refused to come, as did Morocco.

The scheme is no more than unwanted Western meddling, they complain, and a high handed attempt to impose foreign ways on the Middle East.

Mr Blair however denied the charges. "What we're doing today is to say, 'Look, sensible people sitting down and looking at the situation in the Middle East know there needs to be a process of reform and change,'" the Prime Minister said after a private breakfast with Mr Bush. "Now, that's not for us to dictate to people, but it is for us to help them get there."

But after the Abu Ghraib prison abuse scandal, Washington's moral credibility in the region has rarely been lower. US officials increasingly acknowledge that without progress on the Palestinian-Israeli issue, in a way that suggests the US is not irrevocably tilted towards the Israeli cause, prospects for any wider democratic initiative in the region are dim.

Before he left for the summit, the Jordanian monarch - one of the staunchest US allies in the region - said "no programme on the broader democratic initiative is possible, until a resolution of the [Palestinian-Isaeli] conflict has been achieved".

But Washington, outwardly at least, is hardly changing its ground. Once again US officials stressed that the Sharon plan to pull out of Gaza and parts of the West Bank was a "hugely significant" step, whose importance was missed by many countries, among them Britain.

In yesterday's opening session Mr Bush gave an upbeat review of the strong US economy, now growing at an annual 4 per cent or more, despite the sharp rise in oil prices.

Many countries regard the soaring US budget and trade deficits as another threat to world prosperity. But Mr Bush defended his massive tax cuts, a prime cause of the budget deficit, as essential to start the present recovery.

The US believes it is up to Europe and Japan to boost their own economies, to reduce domestic unemployment and take the weight off the US.

Today's session, to which several African leaders have been invited, will deal with debt relief, the fight against poverty and AIDS, and helping international peacekeeping operations in global trouble spots.

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