Middle East envoy Tony Blair said resolving the Israeli-Palestinian conflict would remove a toxic barrier between the West and Islamic nations and help deal with the nuclear threat from Iran.

Peace in the region would “hugely help in resolving this bigger problem” and remove an “issue which puts such a poison into the relationship between the West, Israel, if you like, and the world of Islam,” the former British prime minister said yesterday in an interview in Jerusalem.

Blair, who turns 56 today, reflected in the interview on his two years of service as representative of the so-called “Quartet,” which was set up by the U.S., European Union, Russia and the United Nations to promote Israeli-Palestinian peace efforts. His focus has been on helping the Palestinians develop their economy and improve security.

He has mostly been on the sidelines of Mideast peacemaking as the Bush administration unsuccessfully tried to sew up an agreement between Israel and the Palestinians before leaving office. President Barack Obama has pledged “vigorous” support for resolving the conflict and has invited Israeli and Palestinian leaders to White House meetings this month.

Blair, interviewed in east Jerusalem at the American Colony Hotel, where his regional office is located, said the next six months will be decisive in restoring momentum to Israeli- Palestinian peace efforts.

‘Seize the Opportunity’

“This is the moment when we seize the opportunity, make the decisions and are truthful about what the problems are,” Blair said. “You have a new Israeli government and an administration in America that is determined to carry it through, and you have the international community desperate to have this issue resolved.”

Blair kicked off his Middle East job by helping to arrange a Paris conference in October 2007 that raised about $7.4 billion from donor countries to boost the Palestinian economy.

His mandate was limited to helping the Palestinians with economic development and building governing institutions in preparation for statehood. Blair’s predecessor, former World Bank President James Wolfensohn, quit in frustration after 11 months on the job.

“You would be certifiable if, given the history, you said, ‘Look, I can guarantee it’s all going to work,’” Blair said, after a day with Palestinian officials in the West Bank city of Ramallah.

Visiting the region every six weeks or so, Blair has met regularly with Palestinian Authority President Mahmoud Abbas in Ramallah. He also held meetings with former Israeli Prime Minister Ehud Olmert and has recently spent time with Benjamin Netanyahu, who took over as premier on March 31.

Economic Focus

One planned visit to Gaza was canceled because of Israeli security warnings. Blair finally made the trip in March, about two months after Israeli troops left the coastal enclave following a 22-day offensive against Hamas.

He has focused on four economic projects, including agro- industrial parks in the West Bank, sewage treatment in Gaza and tourism to Bethlehem.

“He’s not really making a difference,” said Ghassan Khatib, a professor of Arab studies at Birzeit University in the West Bank and a former Palestinian Cabinet minister. “His role was compromised from the beginning because it was confined to economic and non-political issues.”

Blair said he’s been encouraged by Netanyahu’s emphasis on building “economic peace” with the Palestinians, though he said he believes such efforts should come in parallel with political negotiations leading to a Palestinian state.

Northern Ireland

“If all you do is do economic activity and have no political negotiations, that won’t work,” Blair said. If that’s what Netanyahu means, “then it isn’t going to work, but I don’t think that is what he means.”

Blair’s experience as peacemaker goes back to 1998 when he and former U.S. Senator George Mitchell helped forge the Good Friday accord that brought an end to sectarian violence in Northern Ireland. Mitchell was tapped in January to be Obama’s Middle East representative.

“If you said in 1997 that in the next 10 years either the Northern Ireland issue or Israel-Palestine would be solved, most people would have bet that the issue that would have been solved would have been Israel-Palestine,” Blair said. “People thought Northern Ireland was pretty hopeless. It wasn’t.”

The division among the Palestinians, with Hamas seizing control of the Gaza Strip in 2007, has made Blair’s mission more complex. A yearlong round of peace talks was halted indefinitely when Israel started its military offensive against Hamas in Gaza. The operation left about 1,300 Palestinians and 13 Israelis dead. Hamas is classified as a terrorist organization by the U.S. and EU.

“My view is that if we establish real momentum, Hamas will face a choice, which is to be part of this or exclude themselves,” Blair said. “I have no doubt at all that if you create a genuine momentum for a two-state solution, a majority of Palestinians will buy that.”