The United States faces a "grave and deteriorating" situation after three years of war in Iraq, a high-level commission on the war in Iraq warned bluntly Wednesday, recommending enhanced diplomatic efforts on Middle East peace to help stabilize the country and hopefully permit the withdrawal of most U.S. combat troops by early 2008.

The panel called for direct talks between Israel and Syria, a move opposed by the Bush administration, and advocated a U.S. push for a "comprehensive Arab-Israeli peace." The new diplomatic effort should be launched by December 31, the panel stated in its first recommendation.

"This commitment must include direct talks with, by and between Israel, Lebanon, Palestinians [those who accept Israel's right to exist], and Syria," the report said, adding that Israel must return the Golan Heights to Syria if a comprehensive peace is achieved.

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"In exchange for these actions and in the context of a full and secure peace agreement, the Israelisshould return the Golan Heights, with a U.S. security guarantee for Israel that could include an international force on the border, including U.S. troops if requested by both parties.

"There is no path that can guarantee success, but the prospects can be improved," the bipartisan commission said after an eight-month review of a war that has resulted in the deaths of more than 2,900 U.S. troops and grown so unpopular at home that it helped trigger a Democratic takeover of Congress in last month's elections.

In response, Syria and Iran said they would be willing to help try to stabilize Iraq but would want something in return, adding that neither has a magic solution to the country's bloodshed, Mideast officials and analysts said Wednesday.

Israel refused to comment on the report. An official said it did not represent a new policy, while experts said the "Israel-Palestine
first" approach has been tried before by then-Secretary of State James Baker - and failed.

U.S. President George W. Bush received the report in an early meeting at the White House with commission members, and pledged to treat each proposal seriously and act in a "timely fashion." He was flanked by the commission's co-chairmen, former Secretary of State James A. Baker III, and former Rep. Lee Hamilton.

U.S.: No direct talks with Iran unless uranium suspended
The White House on Wednesday said it has ruled out one-on-one talks with Iran about Iraq unless Tehran suspends uranium enrichment, after the Iraq Study Group recommended more engagement with the Islamic Republic

"It's not clear ... whether the report advocates one-on-one talks with Iran, there is talk about developing a support group," White House spokesman Tony Snow said. "There may be a difference between one-on-one talks with Iran, which is something that we have ruled out," he said, unless Tehran suspends enrichment and reprocessing activities.

War in Iraq
The report painted a grim picture of Iraq more than three years after U.S. forces toppled Saddam Hussein.

It warned that if the situation continues to deteriorate, there is a risk of a "slide toward chaos [that] could trigger the collapse of Iraq's government and a humanitarian catastrophe.

"Neighboring countries could intervene... The global standing of the United States could be diminished. Americans could become more polarized," commissioners said.

The report said there needs to be a renewed and sustained commitment by the United States to a comprehensive Arab-Israeli peace on all fronts: Lebanon, Syria and Bush's June 2002 commitment to a two-state solution for Israel and Palestine.

More than three-and-a-half years after the March 2003 invasion that toppled Saddam Hussein, about 140,000 American troops remain in Iraq fighting an insurgency and trying to stop sectarian strife between Shiites and Sunnis.

The conflict has lasted longer than U.S. involvement in World War Two and has killed more than 2,900 American troops.

Ethnic fighting has killed thousands of Iraqis, raising debate over whether the country has descended into civil war and whether the U.S.-backed government of Prime Minister Nuri al-Maliki can stem the carnage.

Bush has been under added political pressure to change course in Iraq since the November 7 elections when voters, who had soured on the war, ended Republican control of Congress.

The president, who was briefed on the report on Tuesday, has said he will listen to the group's ideas but the White House said it doubted the panel's five Republicans and five Democrats would provide a "magic bullet."

Robert Gates, a former CIA director and commission member until Bush nominated him last month to replace Donald Rumsfeld as defense secretary, said the United States was not winning in Iraq and dismissed the prospect of quick solutions.

'No new ideas'
"It's my impression that, frankly, there are no new ideas on Iraq," Gates told his Senate confirmation hearing.

Still, the group led by Republican former Secretary of State James Baker and former Democratic Rep. Lee Hamilton of Indiana is expected to influence the debate over the war because its members were unanimous in their advice.

Sources familiar with the group's deliberations said the report would recommend the U.S. military shift away from combat and toward a support role in Iraq over the next year or so.

It is also expected to call for a regional conference on stabilizing Iraq that could lead to direct U.S. talks with Iran and Syria, an option that the White House has opposed.

Pulling back combat forces to focus on providing training, advice, logistics and intelligence would still leave tens of thousands of U.S. soldiers in Iraq.

Bush has given little sign he will contemplate any quick exit from Iraq, saying repeatedly that U.S. forces would stay until the job is done.

"It's in our interests to help liberty prevail in the Middle East, starting with Iraq. And that's why this business about graceful exit simply has no realism to it at all," Bush said after he met Maliki in Jordan last week. "We'll be in Iraq until the job is complete."

The White House has sought to blunt the impact of the Iraq Study Group's work by conducting its own review of the war. Bush aides have said he is likely to take weeks, rather than months, to decide how and whether to change his policy.