WASHINGTON - While reaffirming the "special relationship" between their two countries, U.S. President Barack Obama and Israeli Prime Minister Benjamin Netanyahu appeared unable to bridge major differences in their approaches to Iran and Israeli-Palestinian peace efforts following their White House meeting here Monday.

Israeli Prime Minister Benjamin Netanyahu (L) listens as U.S. President Barack Obama speaks in the Oval Office of the White House in Washington May 18, 2009. (REUTERS/Larry Downing) While Obama said he may be prepared to impose additional sanctions against Iran early next year if diplomatic efforts to persuade it to curb its nuclear program fail to make progress, he refused to set what he called "an arbitrary deadline." Israeli officials had pressed Washington for an early October deadline.

And while Obama repeatedly stressed the importance of a two-state solution to the Israeli-Palestinian conflict, Netanyahu never uttered the phrase or alluded to the possibility of a Palestinian state during a 30-minute press appearance with the U.S. president after their meeting in the Oval Office.

"My view is less one of terminology than substance," he said, adding a number of pre-conditions for any final settlement.

"If... the Palestinians recognize Israel as the Jewish state, if they fight terror, they educate their children for peace and for a better future, then I think we can come to a substantive solution that allows the two peoples to live side by side in security and peace," he said, stressing that he was nonetheless eager "to resume negotiations (with the Palestinians) as rapidly as possible..."

Netanyahu also declined to respond to explicit calls by Obama to both stop Israeli settlement activity in the occupied territories and to address the humanitarian situation in Gaza, which has been subject to strict blockade by the Israeli authorities and Egypt that has prevented any reconstruction of the territory devastated by Israel's three-week military campaign in late December and January.

"Israel is going to have to take some difficult steps as well. And I shared with the prime minister the fact that under the Road Map, under Annapolis, there is a clear understanding that we have to make progress on settlements; that settlements have to be stopped in order for us to move forward," Obama said during the press appearance.

"The fact is that if the people of Gaza have no hope, if they can't even get clean water at this point, if the border closures are so tight that it is impossible for reconstruction and humanitarian efforts to take place, then that is not going to be a recipe for Israel's long-term security or a constructive peace track to move forward," he noted, adding that Washington intends to become a "strong partner" in any peace process.

Monday's talks, which Obama called "extraordinarily productive", were perhaps the most widely anticipated of any he has held with a foreign leader since his inauguration nearly four months ago. Unlike George W. Bush, Obama has repeatedly insisted he will make a two-state solution a top priority of his foreign policy and that he sees such a settlement as critical to the larger goal of stabilizing the Greater Middle East, including Afghanistan and Pakistan, and defeating al Qaeda and like-minded groups.

That view was already given voice last week by Jordan's King Abdullah, the first regional leader to visit Obama at the White House, and will no doubt be bolstered by the visits here next week of the beleaguered Palestinian Authority president, Mahmoud Abbas, who has insisted that Netanyahu commit himself to a two-state solution, and Egyptian President Hosni Mubarak.

Obama's determination to conclude a two-state settlement, however, clearly clashes with the agenda of Netanyahu's new right-wing government, which is not only publicly opposed to a two-state solution but whose top priority is to prevent Iran - by military means, if necessary - from obtaining a nuclear-weapons capability, a capability which, according to some senior Israeli intelligence officials, it may acquire as soon as the end of this year.

Indeed, Netanyahu and his allies among U.S. neo-conservatives and other elements of the so-called "Israel Lobby" here have argued that Israel cannot be expected to advance the peace process when it faces the "existential" threat posed by a nuclear Iran, particularly given Tehran's support for Hamas, which controls Gaza, and Hezbollah in Lebanon. Until that threat is addressed, they insist, little or no progress can be achieved on the Palestinian front.

But Obama explicitly rejected that thesis Monday. While recognizing "Israel's legitimate concerns" about Iran's nuclear ambitions, he said, "If there is a linkage between Iran and the Israeli-Palestinian peace process, I personally believe it actually runs the other way."

"To the extent that we can make peace... between the Palestinians and the Israelis, then I actually think it strengthens our hand in the international community in dealing with the potential Iranian threat," he said.

The appearance of the two leaders before reporters followed a lengthy private meeting which reportedly lasted a full hour longer than anticipated - an indication, according to ret. U.S. Amb. to Israel, Samuel Lewis, that they failed to agree to on key issues. In addition, the two sides also failed to issue a joint statement summarizing the talks, another indication of disagreement, according to Lewis.

On Iran, Obama offered more details about U.S. diplomatic strategy than he had before. He suggested that Washington was holding off on engaging Tehran in earnest until after its elections next month.

After elections are completed, he said, "We are hopeful that... there is going to be a serious process of engagement, first with the P5 Plus 1 process, which is already in place; potentially through additional direct talks between the United States and Iran."

"We should have a fairly good sense by the end of the year as to whether they are moving in the right direction and whether the parties involved are making progress and that there's a good-faith effort to resolve differences," he went on. "That doesn't mean every issue would be resolved by that point," he stressed.

At the same time, he stressed that the dangers posed by Iran's acquisition of nuclear weapons was such that, without imposing an "artificial deadline... we're not going to have talks forever. We're not going to create a situation in which the talks become an excuse for inaction while Iran proceeds with developing and deploying a nuclear weapon."

He suggested that Washington would proceed to seek international support for tougher sanctions against Iran but did not mention possible military action, as Netanyahu no doubt had hoped.

"I assured the prime minister that we are not foreclosing a range of steps, including much stronger international sanctions, in assuring that Iran understand that we are serious," Obama said.

In his own remarks, Netanyahu appeared to try to broaden this formulation to include possible military action, saying, "I very much appreciate, Mr. President, your firm commitment to ensure that Iran does not develop nuclear military capability, and also your statement that you're leaving all options on the table."

Jim Lobe's blog on U.S. foreign policy can be read at http://www.ips.org/blog/jimlobe/.

With additional reporting by Ali Gharib.