Benjamin Netanyahu will move aggressively toward improving the Palestinian economy once he becomes Israel's prime minister, a senior adviser said, outlining a new approach toward the U.S.-backed peace process.

The adviser, Dore Gold, told Reuters that while Netanyahu would make Iran's nuclear program his "highest priority," he would not neglect the Palestinian issue even though he envisions a state with only limited sovereign powers.

"I think the key point for Mr. Netanyahu is that once he takes over as prime minister, he will seek to move aggressively on the economic front, trying to improve the condition on the ground for the Palestinians," Gold said late on Wednesday.

Netanyahu, leader of the right-wing Likud party and prime minister from 1996 to 1999, was tapped by President Shimon Peres to try to form a government after a February 10 election.

Palestinian leaders have said they oppose Netanyahu's desire to shift the focus of U.S.-backed peace talks from territorial issues that have frustrated negotiators to what he has argued would be the easier task of shoring up the Palestinian economy.

"If the international community gets beyond the usual rhetoric associated with the Arab-Israeli peace process and looks at the reality on the ground, I believe that they will understand the logic of Mr. Netanyahu's policy," Gold said.

"Don't forget, we've gone through six Israeli prime ministers, two American presidents, and no one has delivered a peace agreement since 1993," he said.

Gold said Netanyahu "has some very specific ideas in this area" but a detailed plan would have to await consultations with Israeli security officials after he takes office.

COALITION BUILDING

Netanyahu has been attempting to put together a coalition that includes outgoing Foreign Minister Tzipi Livni's centrist Kadima party, a middle-of-the road government that could reduce chances of friction with the Obama administration, which has pledged a swift pursuit of a deal on Palestinian statehood.

But Livni wants a clear commitment from Netanyahu that he would actively work toward statehood in land-for-peace negotiations -- something Palestinians also want from him.

Netanyahu has spoken only in general terms about a Palestinian state, which he has said would have limited sovereignty and be demilitarized.

A proponent of Jewish settlement in the West Bank, he has not outlined his vision of its future borders.

"Netanyahu is not interested in semantics -- Palestinian 'state' versus some other label," said the U.S.-born Gold, a former Israeli ambassador to the United Nations who advises Netanyahu on foreign policy.

"He's looking at the powers of a Palestinian state. And what is critical for him, is that the Palestinians have all the powers necessary to enjoy self-government, but none of the powers to undermine the security of the State of Israel.

"Some people say a Palestinian 'state' up front, afterwards try and subtract powers implicit in their use of the word state. Mr. Netanyahu's approach, in a certain sense, is more honest."

Asked about what Israel and the United States see as an Iranian quest for nuclear weapons, Gold said Netanyahu had met twice as opposition leader with Barack Obama before he became U.S. president and Iran was at the center of their discussions:

"I'm sure that Mr. Netanyahu feels confident in the assurances that President Obama has stated publicly that the acquisition of nuclear weapons by Iran would be a game changer and completely upset the balance of forces in the region," he said.

Israel is widely believed to be the only Middle Eastern state with nuclear weapons.

As for the possibility of an Israeli attack on Iran, which denies it is seeking atomic arms, Gold said: "That's obviously a question dependent on the most sensitive intelligence, which the prime minister would have to obtain when he enters office."