By BEN FELLER
AP White House Correspondent
WASHINGTON - Exasperated by stalled Middle East peace talks in a season of tumultuous change, President Barack Obama jolted close ally Israel Thursday by embracing the Palestinians' terms for drawing the borders of their new nation next door. Prime Minister Benjamin Netanyahu of Israel rejected the idea as "indefensible" on the eve of his vital White House meeting with Obama.
The U.S. president said that an independent Palestine should be based on 1967 borders - before the Six Day War in which Israel occupied East Jerusalem, the West Bank and Gaza - as adjusted by possible land swaps agreed upon by both sides. He said Israel can never live in true peace as a Jewish state if it insists on "permanent occupation."
Obama's effort to salvage a peace effort that is in shambles was a major change in tactics for a president running out of patience and reasons to be subtle. The Israeli-Palestinian stalemate has remained immune to the popular uprisings and historic drives for freedom that have swept much of the region.
He pushed both sides to accept his starting point - borders for Palestine, security for Israel - and get back to solving a deadlock "that has grinded on and on and on."
In a sweeping review of recent uprisings and authoritarian crackdowns across the Arab world, Obama was also unsparing in his words for the Palestinian leadership, repudiating its pursuit of unilateral statehood through the United Nations and questioning its alliance with a Hamas faction bent on Israel's destruction.
"At a time when the people of the Middle East and North Africa are casting off the burdens of the past, the drive for a lasting peace that ends the conflict and resolves all claims is more urgent than ever," Obama said, playing the rapid change of the past six months against a standoff that has stymied the Mideast for decades.
More broadly, before a polite diplomatic audience at the State Department, Obama sought to clarify the U.S. role toward a part of the world undergoing a transformation. He implored the American people to see that it is worth devoting U.S. might and money to help stabilize a dangerous region and help people fighting for freedom.
"There must be no doubt that the United States of America welcomes change that advances self-determination and opportunity," the president said. "Yes, there will be perils that accompany this moment of promise. But after decades of accepting the world as it is in the region, we have a chance to pursue the world as it should be."
It was Obama's explicit endorsement of the 1967 borders that changed the dynamic.
The U.S., the international community and even past Israeli governments have endorsed the idea of an agreement based on the 1967 lines, but Obama's new emphasis was a clear prodding for Israel to act.
The way Obama put it means the U.S. now accepts 1967 lines, with land swaps, as the basis for the borders of a Palestinian state - and not just that such a result would be the desired outcome of negotiations, as had been the U.S. stand.
The United States insists, too, that Israel to end up with a safe, secure state without fear of attack from Palestinians.
In a cool statement released late Thursday in Jerusalem, Netanyahu rejected a full withdrawal from the West Bank, saying the 1967 lines would leave major Jewish settlements outside Israel. It was unclear whether Obama's stand would be enough to persuade the Palestinians to drop their push for U.N. recognition of their statehood.
In the run-up to the president's speech, the White House had sought to downplay the role of the Mideast peace standoff in his address, emphasizing instead other elements such as his proposed financial support for Egypt and Tunisia, two nations that have risen up and embraced democracy. But the address only served to underscore how central the Israeli-Palestinian conflict is to the stability of the whole region and the political interests of the United States
Obama sought to give perspective to a five-month period in which thousands have died in protests for human rights, two countries' leaders have been toppled, others are teetering, the U.S. has been drawn into an armed conflict in Libya and America has launched a stunning, successful mission to find and kill Osama bin Laden in Pakistan. The president tried to minimize bin Laden's reach even in death, saying his al-Qaida vision of destruction had already been deemed a "dead end" by those wanting a better life.
Moving country by country, Obama offered his toughest words yet for Syrian President Bashar Assad, in whom the U.S. has lost hope as a reformer given his government's bloody crackdown on dissidents. Obama did not call for Assad to step down but did accuse him of murdering his people. "The Syrian people have shown their courage in demanding a transition," Obama said. "President Assad now has a choice: He can lead that transition or get out of the way."
One 24-year-old Syrian said the U.S. president was too late.
"It's too bad hundreds of people died before he made the speech," said Mustafa, who fled the coastal town of Banias, which has seen some of the biggest protests in recent weeks, and who did not give his surname for fear of reprisals. "I think it's too late for Assad to lead a peaceful transition to democracy after all that happened."
In seizing his own Mideast moment, Obama offered a speech that was in some ways notable for what he did not mention.
While critical of autocracy throughout the Mideast, he failed to mention the region's largest, richest and arguably most repressive nation, U.S. ally Saudi Arabia. Nor did he mention Jordan, a staunch U.S. ally that has a peace deal with Israel. Also left out was the United Arab Emirates, the wealthy, pro-American collection of mini-states on the Persian Gulf.
On the Israeli-Palestinian peace process, he raised the question of Hamas but did not seek to answer it. A proposed unity Palestinian government would pair the Fatah-dominated administration in the West Bank and the Gaza-run Hamas, which is considered a terrorist organization by the U.S. and seeks to destroy Israel.
"How can one negotiate with a party that has shown itself unwilling to recognize your right to exist?" Obama asked. "In the weeks and months to come, Palestinian leaders will have to provide a credible answer to that question."
Obama also conceded that borders were just a start. He had no blueprint for resolving enormous conflicts over the status of Jerusalem and the fate of Palestinian refugees.
And he gave little attention to Iran, where U.S. attempts at outreach have gone nowhere.
On Yemen, a key partner in the U.S. fight against al-Qaida, Obama called on President Ali Abdullah Saleh to keep his commitment to transfer power. On Bahrain, home to the U.S. Navy's Fifth Fleet, Obama said the only way forward is dialogue between the government and opposition, "and you can't have a real dialogue when parts of the peaceful opposition are in jail."
Associated Press writers Matthew Lee and Erica Werner in Washington, Dan Perry and Josef Federman in Jerusalem, Karin Laub in Ramallah and Robert Reid in Cairo contributed to this report.