U.S. Secretary of State Condoleezza Rice met with Prime Minister Ehud Olmert in Jerusalem on Thursday and praised the prime minister for his diplomatic initiative presented earlier this week.

"Rice expressed her appreciation for Prime Minister Olmert's speech earlier this week and said that it was an important step that was likely to both contribute towards calm and advance the peace processes in the region," said the Prime Minister's Office in a statement.

Olmert said Monday during a speech in Sde Boker that Israel would accept a territorially contiguous Palestinian state in the West Bank in exchange for Palestinians relinquishing their demand for a return of Palestinian refugees to Israel.

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Rice also praised the Gaza cease-fire, as well as Israel's restraint in the face of violations of the truce by Palestinian militants.

"[The cease-fire] must be backed by deeds," said the secretary of state.


"Prime Minister Olmert informed Secretary of State Rice on his meeting with Egyptian intelligence chief Omar Suleiman regarding the cease-fire, [arms] smuggling and the ongoing efforts to release [captured Israel Defense Forces soldier Gilad Shalit," said the statement. "The secretary of state updated the prime minister on her meeting earlier today with Palestinian Authority Chairman Mahmoud Abbas."

"The two also discussed the Iranian issue," added the statement.

Olmert's chief of staff Yoram Turbowitz, his military adviser, Major General Gadi Shamni, the prime minister's diplomatic adviser, Shalom Turgeman, and his media adviser, Asaf Shariv, also attended the meeting.

The American delegation included U.S. Ambassador to Israel Richard Jones, Assistant Secretary of State for Near Eastern Affairs C. David Welch and National Security Council Director for Near East and North African Affairs Elliot Abrams.

Following her meeting with Olmert, Rice met with Foreign Minister Tzipi Livni.

Livni said prior to the meeting that "the prime minister's speech was very important, in which he sent an important message to the Palestinian Authority."

"I believe that there is a diplomatic horizon," she added. "I would like to thank the United States and Secretary Rice on their policy which ensures that terror is not rewarded. I would also like to thank them for on the other hand sending a message to moderates that there is a diplomatic horizon, which strengthens them."

Rice meets Abbas, says Washington to intensify peace efforts
Speaking a press conference with Abbas in Jericho hours earlier, Rice said that Washington wanted to "intensify our efforts" to renew the peace process.

She said that the U.S. has made clear it expects a viable, contiguous Palestinian state when it is created, and that no actions should be taken now to prejudge the outcome of a final peace agreement.

She added that the U.S. is interested in seeing Palestinian Authority reforms of its security services and political institutions.

Meanwhile, Abbas told reporters that talks on a unity government with the ruling Hamas organization had reached a "dead end."

Ahead of the Jericho meeting, an Abbas confidant said he believed the cease-fire and a conciliatory speech by Olmert earlier this week have created new momentum.

"I think it's up to us and the Israelis to make it work," said the chief Palestinian negotiator, Saeb Erekat. "It can work. The opportunity is there."

In Amman on Thursday, Bush appealed for support for Abbas, referring to him by his commonly used nomme de guerre, Abu Mazen.

"Abu Mazen, who I believe wants there to be a Palestinian state living side by side in peace with Israel, deserves the support of the world. And he deserves support in peeling his government away from those who do not recognize Israel's right to exist," Bush said at a news conference with the Iraqi Prime Minister Nuri al-Maliki.

Israeli officials said Olmert would emphasize to Rice that pressure must be maintained on the Palestinian leadership to continue isolating Hamas and press for the formation of a Palestinian government that recognizes Israel, renounces violence and accepts previous peace accords, as the international community has demanded.

Palestinian Foreign Minister Mahmoud Zahar of Hamas said he didn't think the meeting would help the Palestinian cause.

"Our experience with these meetings and these visits are that they justify more Israeli aggression against our people," Zahar said at a news conference before the Rice-Abbas talks began.

Sources say that Rice's visit to Jerusalem is designed to show American support for the fledgling negotiating process. The process began with the cease-fire that began Sunday, and should presumably lead to setting up a Palestinian national unity government.

In the next stage, the U.S. is expected to help jump-start the political negotiations between Israel and the PA.

Palestinian sources said Rice is expected to ask Abbas and Israel to expand the cease-fire to the West Bank. They will also discuss implementing the border passes agreement that was signed by the U.S., Israel and the PA after Israel's pullout from Gaza.

UN report: Israel violating Gaza border crossing agreement
The visit by Rice is expected to be preceded by the release of an extremely critical report written by the United Nations Coordinator for Humanitarian Affairs in the Territories. The report, a copy of which has reached Haaretz, accuses Israel of violating the border crossings agreement's every single clause.

The report says that closing the passes for most of the year catapulted the unemployment rate in the Gaza Strip from 33 percent in 2005 to 42 percent this year. Since Shalit's abduction on June 25, the passes have been closed 86 percent of the time, the report says. Since mid-January, the average number of trucks passing through Karni has been 12 a day, while in the agreement Israel had undertaken to raise the number to 400 trucks a day by the end of the year.

Israel also violated its commitment to alleviate the passage of people and merchandise in the West Bank, and to enable the passage between the Gaza Strip and the West Bank. In fact, all contact between the two regions has been cut off. The number of roadblocks in the West Bank rose during the past year by 44 percent and Israel divided the West Bank into ten enclaves.

Israel broke its commitment to allow convoys to pass from the Gaza Strip to the West Bank and to advance the operation of air and sea ports in the Gaza Strip.

The UN report emphasizes that since the beginning of April, Israel had cited security reasons for most of the closures of the Karni terminal, but that no security breaches had occurred there since April 26.

The cumbersome security arrangements enable only 40 percent of the trucks carrying export goods from the Gaza Strip to go through the border pass. The resulting damage to agricultural exports is estimated to be more than $30 million for this year. The losses incurred to the hothouses purchased from the Gush Katif settlements, resulting from the need to destroy hundreds of tons of strawberries and flowers, reached $6 million.