By Wafa Amr RAMALLAH, West Bank, Nov 15 (Reuters) - The creation of a Palestinian state through negotiations with Israel is the key to achieving a wider peace in the Middle East, Palestinian President Mahmoud Abbas said on Wednesday. The moderate leader, who has been trying to cobble together a coalition with governing Hamas Islamists that might prompt Western power-brokers to ease an aid blockade on his people, called on Israel to enter comprehensive regional peace talks. "This is the hour of truth, because peace in this region will not be achieved except by Israel's full withdrawal from the Arab and Palestinian territories that were occupied in (the Middle East war of) 1967," Abbas said in a speech. "I appeal to the Israelis: Do not waste this chance for peace. Enough with the shedding of the blood of our sons and yours," he said. Since the mid-term election losses of U.S. President George W. Bush's Republican Party, widely seen as a repudiation of his Iraq policies, analysts have speculated that Washington may redirect its efforts towards ending the Israeli-Palestinian conflict, a major grievance in the Arab and Muslim world. Israeli Prime Minister Ehud Olmert, whose own popularity was undermined by the recent Lebanon war, said after meeting Bush during a U.S. visit this week that he was ready for "serious dialogue" with Abbas. But Olmert insists he will only talk to a Palestinian government that recognises Israel, accepts past peace deals and renounces terrorism -- conditions set by Western powers after Hamas took over the Palestinian government in March. The Palestinians want independence in the West Bank and Gaza Strip, which Israel captured in 1967. Hamas, which helped spearhead the Palestinian revolt against Israeli occupation that erupted in 2000, goes further, advocating as its ultimate aim the Jewish state's destruction. Israel also captured the Egyptian Sinai and the Syrian Golan Heights in the 1967 war. It returned the Sinai to Egypt under a 1978 peace accord and there have been intermittent talks between Israel and Syria -- still technically at war -- on the Golan. Israel withdrew from Gaza last year but says it will keep Jewish settlement blocs in the West Bank under any future deal. Another sticking point is the Palestinians' demand for the implementation of a "right of return" for Palestinian refugees from the 1948 war of Israel's creation, along with millions of their descendants, to lands now in Israel. Israel rules this out as "demographic suicide". Abbas said negotiations could bridge the differences. "The path to security and peace is only one, and this is by your commitment to our national rights, your withdrawal from our land, your implementation of international laws, and finding a just and agreed-upon solution to the refugee problem," he said. "I announce in the name of our Palestinian people our full preparedness to begin serious and final-status negotiations that will put an end to decades of conflict and blood."
