(Adds comments by U.S. assistant secretary of state in paragraphs 9-10, 18) By Caren Bohan WASHINGTON, July 16 (Reuters) - President George W. Bush called on Monday for a Middle East peace conference bringing together Israel, the Palestinians and some Arab neighbors and led by Secretary of State Condoleezza Rice. Under pressure from Arab allies to break years of stalemate, Bush said the conference -- meant to pave the way to a Palestinian state alongside Israel -- would take place this autumn. But he specified no date, location or which neighbors would be invited. In Jerusalem, Israeli Prime Minister Ehud Olmert told President Mahmoud Abbas that Israel would start freeing 250 Palestinian prisoners this week. Prisoner releases have bolstered confidence in the past. Bush reaffirmed his vision of a Palestinian state at peace with Israel and said Palestinians faced a choice between the Islamist militant group Hamas, which controls the Gaza Strip, and the more moderate Abbas. "This is a moment of clarity for all Palestinians. Now comes a moment of choice," Bush said in a White House speech. "The alternatives before the Palestinian people are stark." Bush said the participants in the talks would help review progress on building Palestinian institutions. PALESTINIAN STATE "They will provide diplomatic support for the parties in their bilateral discussions and negotiations so that we can move forward on a successful path to a Palestinian state," he said. David Welch, U.S. assistant secretary of state for Near Eastern affairs, told reporters that details of the proposed conference had not been worked out. "You do not make peace by a speech. This is a contribution to getting there," Welch said when asked about the significance of Bush's speech for peacemaking. With only 18 months left in office, Bush has said he will send Rice and Defense Secretary Robert Gates to the region soon and they will press anew for help on Iraq which U.S. troops invaded in 2003. Olmert and Abbas met for two hours at Olmert's Jerusalem residence. They discussed "how they can see arriving at a two-state solution" to the Israeli-Palestinian conflict, Olmert's spokeswoman Miri Eisin said, although sources in Olmert's office said they did not discuss such divisive issues as the fate of Jerusalem, borders and Palestinian refugees. "The Palestinians want to go a lot faster. The average Israeli would like to go a lot slower. We have to find something that is acceptable to both sides," Eisin said. Palestinian Information Minister Riyad al-Malki said the government, appointed by Abbas last month to replace a Hamas-led cabinet, did not "put much weight on these meetings." "We are not sure about Israel's seriousness," he said. Israel has described its decisions to free 250 low-security Palestinian prisoners, mostly from Abbas' secular Fatah faction, and to suspend kill-or-capture missions against 180 Fatah gunmen, as goodwill gestures in support of the new government. FINANCIAL BACKING Israel has already reopened the financial taps to Western-backed Prime Minister Salam Fayyad's government while tightening the economic and security cordon around the Gaza Strip, which Hamas seized by force on June 14. Bush said the United States would provide the Palestinians with more than $190 million in assistance this year. Welch said this is not new funding, but comes from money already in the pipeline. Western countries rallied behind Abbas with promises of renewed aid after the Gaza seizure. Their hope is to isolate Hamas, branded a terrorist group by Washington, and spur peace moves between Palestinian moderates and Israel. Some political analysts said the strategy could backfire as Abbas will be viewed more as a collaborator with Israel and the United States. U.S. allies such as Saudi Arabia and Egypt have long wanted Bush to get more involved in Middle East peacemaking. While Abbas and Olmert welcomed Bush's call for an international conference, Hamas official Sami Abu Zuhri accused Bush of outlining "a plot to launch a crusade against the Palestinian people." "We call upon all Arab countries to stand firm against these threats," he said in Gaza. (Additional reporting by Dan Williams, Ari Rabinovitch and Adam Entous in Jerusalem; Mohammed Assadi in Ramallah; Nidal al-Mughrabi in Gaza; Sue Pleming in Washington)
