US Secretary of State Hillary Clinton did not rule out the possibility of a US-Israeli compromise that will allow the construction of several thousand housing units to be completed in a number of West Bank settlements.

Taking questions after delivering a wide-ranging policy address to the Council on Foreign Relations in Washington, Clinton was asked to comment on reports of a possible compromise that would eventually permit the construction of 2,000 units. The secretary would only say that she does not want to interfere with the negotiations between Defense Minister Ehud Barak and special US envoy George Mitchell.

The secretary said that any decision would be announced publically.

During her much-anticipated speech Clinton reiterated Washington's demand that Israel cease building in the settlements and allow the conditions necessary for the establishment of a Palestinians state, but she also made clear that the Palestinians are expected to work towards ending incitement and violence.

"For the last few decades, American administrations have held consistent positions on the settlement issue," Clinton said. "And while we expect action from Israel, we recognize that these decisions are politically challenging. And we know that progress toward peace cannot be the responsibility of the United States – or Israel – alone. Ending the conflict requires action on all sides.

"Arab states have a responsibility to support the Palestinian Authority with words and deeds, to take steps to improve relations with Israel, and to prepare their publics to embrace peace and accept Israel’s place in the region. The Saudi peace proposal, supported by more than twenty nations, was a positive step. But we believe that more is needed... By providing support to the Palestinians and offering an opening, however modest, to the Israelis, the Arab states could have the same impact. So I say to all sides: Sending messages of peace is not enough. You must also act against the cultures of hate, intolerance and disrespect that perpetuate conflict. "

Clinton noted that Hamas will not be party to the process so long as it fails to meet the terms set by the Quartet – recognizing Israel, honoring past accords, and abandoning terrorism.

'Determined to prevent nuclear Iran'

As for Syria, Clinton said the US views it as a critical player in the Middle East, and added that Washington intends to restore an ambassador to Damascus. However, she said, Syria will be judged by its actions, not its rhetoric.

On Iran she said: "Neither the President nor I have any illusions that dialogue with the Islamic Republic will guarantee success of any kind, and the prospects have certainly shifted in the weeks following the election. But we also understand the importance of offering to engage Iran and giving its leaders a clear choice: whether to join the international community as a responsible member or to continue down a path to further isolation.

"Direct talks provide the best vehicle for presenting and explaining that choice. That is why we offered Iran’s leaders an unmistakable opportunity: Iran does not have a right to nuclear military capacity, and we’re determined to prevent that. But it does have a right to civil nuclear power if it reestablishes the confidence of the international community that it will use its programs exclusively for peaceful purposes.

"Iran can become a constructive actor in the region if it stops threatening its neighbors and supporting terrorism. It can assume a responsible position in the international community if it fulfills its obligations on human rights. The choice is clear. We remain ready to engage with Iran, but the time for action is now. The opportunity will not remain open indefinitely."