* Israel rebuffs U.S. call to stop all settlement building * Abbas seeks boost from settlement freeze * Meeting could be preview of Obama's Middle East trip (Adds quotes and background) By Matt Spetalnick WASHINGTON, May 28 (Reuters) - President Barack Obama on Thursday ratcheted up pressure on Israel to freeze settlements as he sought to reassure visiting Palestinian President Mahmoud Abbas of U.S. support for Palestinian statehood. Faced with an Israeli rebuff of Washington's latest appeal to halt settlement building, Obama held talks with Abbas 10 days after hosting Israeli Prime Minister Benjamin Netanyahu, who remains at odds with the U.S. administration over peacemaking strategy. Seeking to revive stalled peace efforts, Obama made clear he would continue pushing Netanyahu to impose a total freeze on Jewish settlement construction in the occupied West Bank and embrace the goal of Palestinian statehood. "We can't continue the drift ... We need to get this thing back on track," Obama told reporters with Abbas, a Western-backed moderate weakened by Hamas Islamists' control of the Gaza Strip, seated at his side in the Oval Office. Obama stressed that Israel's obligations under a 2003 Middle East peace "road map" include "stopping settlements ... and making sure that there is a viable Palestinian state." He said Palestinians had to do more to strengthen their security forces and reduce anti-Israel "incitement" he said was sometimes spread in schools and mosques. In his first Washington visit since Obama took office in January, Abbas had been expected to make his case for a tougher U.S. approach toward Netanyahu, who heads a new right-leaning Israeli coalition with pro-settler parties at its core. Netanyahu's government on Thursday spurned U.S. Secretary of State Hillary Clinton's blunt assertion that all settlement activity must stop, including the "natural growth" of existing enclaves that Netanyahu has vowed to continue. Israeli government spokesman Mark Regev responded by reaffirming Netanyahu's intention to allow some further construction to accommodate the expansion of settler families. Even as policy differences have exposed a rare U.S.-Israeli rift, it remains unclear how hard Obama is willing to push the Jewish state to make concessions when his administration has yet to complete its Middle East strategy. PRELUDE TO OBAMA TRIP Obama sees engagement in Palestinian-Israeli peacemaking as crucial to repairing America's image in the Muslim world and drawing moderate Arab states into a united front against Iran. Netanyahu's refusal to endorse a two-state solution to the decades-old conflict, long the cornerstone of U.S. policy, has added a new obstacle to Obama's diplomatic efforts. In Thursday's talks, Obama also sought to shore up Abbas, who governs only in the West Bank while Hamas holds sway in Gaza. "We are fully committed to all of our obligations under the road map," Abbas said. Palestinians contend that expansion of settlements, deemed illegal by the World Court, are aimed at denying them a viable state. Israel says the Palestinian Authority has not done enough to rein in militant violence. Abbas's visit could be a preview of what Obama can expect next week when he sees Saudi King Abdullah in Riyadh and Egypt's President Hosni Mubarak in Cairo and then delivers a speech to the Muslim world. Muslims will be looking for signs of how Obama will tackle the Arab-Israeli standoff. His predecessor, George W. Bush, was criticized for neglecting the decades-old conflict and most Muslims believed his policies were biased in favor of Israel. Obama said he would talk about his ideas for Israeli-Palestinian peace in the June 4 address but brushed aside speculation that he would unveil a new peace initiative. "It is a critical factor in the minds of many Arabs throughout the region and beyond the region," he said. Obama signaled, however, that he hopes to work toward a broader peace between Israel and its Arab neighbors. Abbas has ruled out restarting peace talks until Israel commits to Palestinian statehood and a settlement freeze. Netanyahu has said he is ready to resume negotiations immediately but wants to exclude tough territorial issues. Abbas said on Thursday there could be "no progress" unless final-status issues were discussed. Further underscoring the difficult path ahead, Israeli troops killed a fugitive leader of Hamas's military wing in the West Bank on Thursday, Palestinian and Israeli officials said. (Additional reporting by Ori Lewis and Alastair Macdonald in Jerusalem; editing by Mohammad Zargham)
The remains of destroyed Palestinian houses are seen during sunset in the northern Gaza Strip May28, 2009. The houses were destroyed during Israel's three-week long offensive in Gaza Strip last January. ...
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