By Arshad Mohammed - Analysis

WASHINGTON (Reuters) - Israeli Prime Minister Ehud Olmert's decision to step down makes the already improbable U.S. goal of achieving a comprehensive Israel-Palestinian peace deal this year even more elusive, analysts said on Thursday.

But it might create a little more space for negotiating a partial deal or, perhaps, a document marking any progress that may have been made by Olmert and Palestinian President Mahmoud Abbas and their negotiating teams.

"Can Olmert reach a half-baked agreement with Abbas that might move the ball further than it's been moved? Maybe. Can he achieve an agreement which can be sold or implemented and would fundamentally change the situation on the ground? Absolutely not," said Aaron David Miller, a former U.S. negotiator.

"It is in between that 'maybe' and that 'absolutely not' that there is political space for him to intensify a process that was already in train," added Miller, author of "The Much Too Promised Land: America's Elusive search for Arab-Israeli Peace."

Dogged by corruption scandals, Olmert thrust Israeli politics and Middle East peace talks into turmoil on Wednesday by announcing that he would step down after a September 17 vote within his centrist Kadima party to choose a new leader.

It could take months for his successor to cobble together a new coalition, leaving Olmert in the role of caretaker prime minister, possibly into next year.

Compounding the political uncertainty, right-wing opposition Likud leader Benjamin Netanyahu called on Thursday for parliamentary elections to be brought forward, which could lead to the formation of a government opposed to a peace deal.

Reflecting the considerable uncertainty brought on by Olmert's decision, Ghaith Al-Omari, advocacy director for the Washington-based American Task Force on Palestine, offered a pessimistic assessment.

POLITICAL SEASON

"In my view, it seals the fact that there will be no conflict-ending deal by the end of this year," said Al-Omari, who was a member of the Palestinian negotiating team during the failed 2000 Camp David U.S.-backed peace-making effort.

Al-Omari said he did not think Olmert had the moral authority to negotiate a deal and said his chief negotiator and possible successor, Israeli Foreign Minister Tzipi Livni, would be unable to make concessions in a political season.

"Livni will not enter the election season with 'Dividing Jerusalem' on her banner. She cannot make the necessary compromises," he said. "We are going to get into a holding pattern on the negotiations ... I think it's politically impossible to reach a deal by the end of the year."

Four Kadima ministers, including Livni and Transport Minister Shaul Mofaz, have launched campaigns to replace Olmert in the September 17 vote. Polls have shown Livni ahead within Kadima.

But Netanyahu could try to thwart Kadima's plans to form the next government by mustering a majority in parliament, either to form his own coalition or to move up elections scheduled for 2010.

Opinion polls suggest Netanyahu, a leading critic of Olmert's peace moves, would win such a snap poll.

Shibley Telhami, the Anwar Sadat Professor for Peace and Development at the University of Maryland, College Park, said the desire to prevent Netanyahu from taking power might give Kadima and its Labor allies an incentive to move on peace.

Asked about Olmert's departure, Telhami said: "It doesn't affect the prospects much but, if anything, it affects them a little bit more positively, keeping in mind that the prospects were small to begin with."

"That positive effect comes the immediate sense of urgency, and in some ways panic, on the part of Labor and Kadima, that might push them to try to preserve the government and therefore make them root for some kind of peace progress," he added.

(Additional reporting by Allyn Fisher-Ilan and Joseph Nasr in Jerusalem, editing by Jackie Frank)