(Adds comments from U.S. official, paragraphs 12-13) By Sophie Walker LONDON, Nov 14 (Reuters) - British Prime Minister Tony Blair told the United States on Tuesday progress in resolving the Israeli-Palestinian conflict was the way to get moderate Muslim states to support any new plan for Iraq. Giving testimony via video-link to the U.S. Iraq Study Group, Blair said removing the Middle East's major flash point with broad regional support would pressure Syria and especially Iran to stop supporting terrorism and back peace efforts. He described Iran as "the strategic threat to the region". "The biggest single factor, (Blair) said, in getting moderate Muslim countries to support a new Iraq, would be if there was progress on Israel and Palestine as part of a strategy for the Middle East as a whole -- a point the Prime Minister made repeatedly to the group," his spokesman told reporters. The study group is taking soundings for President George W. Bush on how to change course in Iraq. Bush's Republicans have been forced into a rethink of their strategy in Iraq after suffering a severe setback in last week's mid-term elections. Democrats seized both houses of Congress, partly because of voter anger over the war. IRAQ PLAN Blair, Bush's closest ally, outlined a plan for Iraq based on building support for better governance, particularly on how money is distributed by the Iraqi government, helping that government root out sectarianism from the security forces and equipping Iraq's army. "He said he believed the Iraqi government increasingly wanted to take control of its own affairs and do so in a way which brings together the country as a whole," Blair's spokesman said. Blair told the panel Iraq's government knew what happened beyond its borders was as crucial as domestic developments. A united front from moderate Muslim countries on the Israeli-Palestinian problem and Iraq would make Syria and Iran "think twice" about fuelling sectarian violence, he stressed. "The way to deal with Iran, he said, was not to back down on our demands, but to take away their ability to exploit Muslim opinion and to confront both it and Syria with the strategic choice of whether to be part of the solution or face isolation," Blair's spokesman said. A senior U.S. government official, speaking in London, said he would be surprised if "there is a huge breakthrough to be had" by talking to Iran and Syria. "But certainly if there is a chance to prise Syria away from the embrace that it has put itself into with Iran, I would be all for that," he said, speaking on condition of anonymity. Foreign policy experts say Blair's initiative is more likely to bear fruit with Syria than with Iran, which is likely to make approval of its controversial nuclear programme a precondition for it taking a role in Iraq. "Syria has huge influence in the region -- whether it's Iraq or Lebanon or the Palestinian-Israeli situation. We've always spoken to Syria and the message that we've been delivering is that they've got a choice here," one government source said. Syria is keen to reclaim influence in Lebanese politics and avoid blame in a United Nations probe into the assassination of Lebanon's anti-Syrian ex-prime minister Rafik al-Hariri in 2005. It also wants dialogue with the West about its access to Hezbollah guerrillas in Lebanon and the return of the Israel-occupied Golan Heights. "The Syrians have been fairly clear over the past few years that they are waiting for the Americans to come and talk to them," said Chris Brown, international relations professor at the London School of Economics. (Additional reporting by Katherine Baldwin, Adrian Croft)
