President George Bush swept aside decades of diplomatic tradition in the Middle East yesterday, saying it was "unrealistic" to expect a full Israeli withdrawal from lands occupied during the 1967 war or the right of return for Palestinian refugees.
In a significant policy shift, Mr Bush relaxed Washington's objections to Jewish settlements in the West Bank, and attempts by Israel to dictate the terms of a final settlement with the Palestinians.
He told a joint press conference with the Israeli prime minister, Ariel Sharon, that he was prepared to bless a plan to dismantle Jewish settlements in the Gaza Strip, while retaining Israeli control over substantial sections of the West Bank.
"These are historic and courageous actions," Mr Bush said about the Gaza withdrawal plan. "If all parties choose to embrace this moment, they can open the door to progress and put an end to one of the world's longest-running conflicts."
The concessions offered yesterday by the White House - extracted at a time when Mr Bush is desperate to counter the chaos in Iraq with a foreign policy success - appeared to go further even than Mr Sharon had dared hope.
George Bush points towards the Israeli prime minister, Ariel Sharon, during a joint press conference at the White House to announce America's support for Israel's policy shift on Palestine. Photograph: Pablo Martinez Monsivais/AP
Israeli embassy officials said the US had backed a plan requiring Israel to withdrawal from only four token settlements in the north-west sector of the West Bank with a total of 500 settlers.
They said diplomats had prepared four versions of withdrawal proposals, only for Washington to accept the initial one, which was least generous to the Palestinians.
The agreement is bound to ignite anger in the Arab world, especially Mr Bush's rejection of a Palestinian right of return, which will have a direct impact on countries such as Jordan, Syria and Lebanon which have substantial populations of refugees. For many, the right of refugees, and the descendants of refugees from the 1948 war, to return to what is now Israel is a sacred tenet.
But Mr Bush appeared to rule out the prospect of even a limited number of refugees settling in the Jewish state. "It seems clear that an agreed, just, fair and realistic framework for a solution to the Palestinian refugee issue as part of any final status agreement will need to be found through the establishment of a Palestinian state, and the settling of Palestinian refugees there rather than Israel," he said.
Mr Bush appears to have distanced his administration from other principles that have guided Middle East diplomacy. These are the idea that the Palestinians and Israelis should arrive at a negotiated settlement - first promoted by his father, the first President Bush, in the Madrid accords of 1991 - and that when a final settlement emerged Israel would broadly adhere to UN resolutions and withdraw to its pre-1967 borders.
The president said the wall being built by Mr Sharon across the West Bank should not be viewed as a political boundary, and that the eventual delineation of the borders of an Israeli and a Palestinian state would await final status negotiations.
But he made it evident that the ground rules had changed, giving effective sanction to the Jewish settlement blocks that have been built throughout the West Bank since the 1967 war, and which traditionally were described by the state department as "obstacles to peace".
"In light of new realities on the ground ... it is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949," Mr Bush said.
The twin moves are likely to cause widespread outrage in the Arab world, which accuses Mr Bush of neglecting America's role as an honest broker. They could also reverberate on the Pentagon's attempts to put down the insurrection in Iraq.
But they were welcomed by Tony Blair last night. A Downing Street statement said the international community, led by the "quartet" mediators - the US, EU, UN and Russia - must seize the opportunity to inject new life into the road map peace process. "Israel should now coordinate with the Palestinians on the detailed arrangements," Mr Blair's statement said.
"The Palestinian Authority must show the political will to make the withdrawal from Gaza a success and to deliver on their road map responsibilities, especially regarding security."
Washington's unfettered support for Mr Sharon was a godsend for the Israeli prime minister who had calculated that American backing could help him win over his right-wing Likud party to his plan to withdraw from the Gaza Strip. Mr Sharon envisages an evacuation from all 21 Jewish settlements in the strip as early as next year, but Israel will retain some military installations.
Mr Sharon had struggled to convince the Israeli right about the withdrawal from the Gaza outpost, and was said to be elated at Mr Bush's backing.
The Palestinian response was scathing. From Ramallah, a senior Palestinian figure, Yasser Abed Rabbo, said: "Bush and Sharon are trying to protect each others' political future but are endangering the political future of the whole region."
Earlier Yasser Arafat's office warned any accord between Israel and America on a Gaza withdrawal could lead to an escalation of violence.
© Guardian Newspapers Limited 2004