International Middle East peace envoy Tony Blair said he estimates Israeli Prime Minister Benjamin Netanyahu will promote the establishment of a Palestinian state.

In an interview with Time magazine, Blair, who represents the Quartet of Middle East peace negotiators - including the United States, Russia, the European Union and the United Nations – said this week that Netanyahu "is really clear that he wants economic and security change on the West Bank. That's what we agreed we'd work on with him. There are one or two things that (Netanyahu's) term 'economic peace' can mean. One, that economic development is a substitute for state, and that's obviously not acceptable.

"I personally think he wants the second, to build the (Palestinian) state from the bottom up. I understand and buy into that. It's important for the Israeli government to come out and say we want a two-state solution, but the circumstances have got to be right," the envoy told the magazine after a meeting with the Israeli leader.

Blair mentioned three components he believes are vital to putting the peace process back on track: A credible political negotiation for a two-state solution; a program of major change on the West Bank, and an easing of the blockade in Gaza.

"If we get those, we'll be back in business again," he said. "There's a lot of cynicism and concern about what the new (Israeli) government means here — and obviously a lot of despair after what happened in Gaza. But we have no option but to pick ourselves up from here. What happens in these next couple of months will really be critical."

According to Blair, the resolution of the Israeli-Palestinians conflict would "change the whole dynamic within Islam."

"It (conflict's resolution) will empower the moderates. This is the issue far more than Iraq or Afghanistan — it's what allows the extremists to reach across into moderate opinion," he posited.

Asked under what conditions the international community would agree to resume talks with Hamas, the Mideast envoy said 'there's a problem. It's very hard for the international community to put the money into the Palestinian government where (Hamas) is saying, 'We reserve the right to use violence, to fire rockets at innocent Israeli civilians'. Truth is, if Hamas were to say, 'We're pursuing our political objectives by nonviolent means,' they would, at a stroke, liberate the international community to say there's now got to be a solution.

"Firing these rockets isn't just morally wrong — they're shooting at innocent civilians — but it's also tactically useless. At no level is it sensible. I'm all for Hamas coming into this process, but only on a basis that we can deal with. Otherwise, we're put in an impossible situation in which we're tacitly supporting activities that are geared to violent resistance," Blair was quoted by Time as saying.

However, the envoy said Israel's policy vis-à-vis Gaza "doesn't work" as "Hamas gets what they want through the tunnels and civil society is put at a disadvantage.

"We've got to help the people in Gaza. I'd like to see humanitarian help in its broadest sense going in — that's not just food and fuel but also help in rebuilding infrastructure and houses. The Israelis obviously are concerned about anything that might have a security implication. But we have to distinguish between what is a security risk (for the Israelis) and, as it were, a decision that while Gaza remains under Hamas control, that even necessary help for rebuilding infrastructure will be denied," he said.