By Matt Spetalnick and Jeffrey Heller
WASHINGTON (Reuters) - U.S. President Barack Obama on Monday pressed a two-state solution to the Middle East conflict but failed to win a public commitment from Israeli Prime Minister Benjamin Netanyahu on Palestinian statehood.
In their first White House talks, Obama also urged Netanyahu to freeze Jewish settlement building but sought to reassure Israelis wary about his overtures to Iran that he would not wait indefinitely for diplomatic progress towards curbing Tehran's nuclear ambitions.
The two leaders tried to paper over their differences as Obama waded into the thicket of Middle East diplomacy four months after taking office, but the divisions were hard to ignore.
"It is in the interests not only of the Palestinians but also the Israelis, the United States and the international community to achieve a two-state solution," Obama told reporters with Netanyahu sitting beside him in the Oval Office.
Netanyahu reiterated that he supported self-government for the Palestinians but made no mention of a state, a position underscoring a rare rift in U.S.-Israeli relations.
"We don't want to govern the Palestinians. We want them to govern themselves," Netanyahu said, echoing statements he has made in the past.
Obama sees engagement in Israeli-Palestinian peacemaking -- in contrast to the Bush administration's largely hands-off approach -- as crucial to repairing the U.S. image in the Muslim world and convincing moderate Arab states to join a united front against Iran.
There have been signs Obama hopes to sway Netanyahu with the prospect of normalized ties between Israel and all Muslim countries, but such a comprehensive deal would require extraordinary diplomatic work by the United States.
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With Israeli leaders mostly skeptical of Obama's efforts to engage Iran diplomatically, Netanyahu had planned to stress Israel's growing concerns about Tehran's nuclear program. Israel has not ruled out military strikes against Iran if diplomacy fails.
"The important thing is to make sure there is a clear timetable," Obama said. "By the end of the year we should have some sense whether or not these discussions (involving Iran) are starting to yield significant benefits."
Obama also said he was not closing off a "range of steps" against Iran, including sanctions, if it continues its nuclear program, which Washington believes is aimed at producing an atomic weapon but Tehran says is for peaceful purposes.
Netanyahu's effort to set aside any negotiations with the Palestinians on tough issues such as borders and the future of Jewish settlements could cause friction in traditionally strong U.S.-Israeli relations.
Obama, who has pledged to put Middle East peacemaking high on the agenda, said both Israel and the Palestinians would have to meet their obligations under the 2003 U.S.-sponsored Middle East roadmap.
The plan, widely ignored by both sides, calls on Israel to halt settlement expansion and for the Palestinians to rein in militants.
Despite diverging views, Obama and Netanyahu, meeting for the first time since both took office, appeared to have avoided any fireworks in talks that lasted close to two hours, unusually long for the president's sessions with foreign leaders.
The two men smiled and chatted, leaning towards one another, as reporters filed into the room, but their demeanour became more serious and businesslike when they started speaking.
They had been expected to tread carefully in talks that could set the tone for a still-emerging U.S. strategy to revive stalled peace talks.
(Additional reporting by David Alexander and Ross Colvin; editing by Todd Eastham)