One of the major conclusions of the bipartisan advisory panel on Iraq headed by former Secretary of State James Baker and former Democratic Congressman Lee Hamilton is that the United States is unable to achieve its goals in the Middle East without direct involvement in the Arab-Israeli conflict.

The committee presented President George W. Bush its report yesterday, offering recommendations on policy regarding the quagmire in Iraq.

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The Baker-Hamilton Study Group is recommending that talks involving Israel, Syria, Lebanon and the Palestinians are held within a "Madrid Conference framework," referring to the 1991 Madrid Conference.

The main recommendations of the report deal with U.S. policy in Iraq, and call for shifting the primary role of American forces there from fighting to training the Iraqi military. The panel also recommends diminishing the number of American soldiers deployed in Iraq.

The report described the situation in Iraq as "dire" and "deteriorating."

Responding to the bipartisan panel's recommendations regarding Israel, Prime Minister Ehud Olmert said yesterday that it is unlikely that President Bush will alter his Middle East policy.

Sources at the Prime Minister's Office said last night that the prime minister is not unduly concerned with the report because in his recent meeting with Bush at the White House, he was promised that the U.S. would not divert from the principles of its policy in dealing with terrorist groups and in countering the Iranian nuclear program.

However, the prime minister has also decided not to make explicit comments on the report, even though it does touch directly on Israel, to avoid placing Israel at the center of the debate that is expected to follow the report's publication on the crisis in Iraq.

In relation to Israel, the Baker-Hamilton panel is recommending talks along two main axes: Syria-Lebanon and the Palestinians.

The committee sets the conditions Damascus must fulfill to be considered an effective interlocutor, some of which are similar to those posed by the Bush administration to the Assad regime in exchange for dialogue.

The U.S. continues to demand that Syria avoid interference in Lebanon's domestic affairs; that it cooperate in the investigation of the murder of former Lebanese prime minister Rafik Hariri; that it cease all assistance to Hezbollah and undertake efforts to persuade Hamas to recognize Israel's right to exist.

At the same time, the panel concludes that Israel must return the Golan Heights to Syria as part of a peace treaty, and says that in exchange Israel will be granted security guarantees from the United States on this front.

Regarding the Palestinians, the Baker-Hamilton report concludes that talks on a final settlement should be held, so that a two-state solution in line with Bush's ideas can be achieved.

The committee also urged the Bush administration to give its full backing to Palestinian Authority Chairman Mahmoud Abbas, and to try and further talks on the creation of a Palestinian national unity government.

The panel briefly touched on the question of the Iranian nuclear program, and its main recommendation is that the issue should continue to be handled by the United Nations Security Council. It also suggests that efforts should be made to convince Iran to contribute to the stabilization of the situation in Iraq through regional support groups - which the Baker-Hamilton panel suggests should be set up.

Responding to the bipartisan panel's mention of Syria and talks with Israel, the official Syrian news agency, SANA, focused on the Golan Heights issue in its reports yesterday.

The news agency highlighted the group's recommendation that the U.S. administration press Israel to restore the Golan Heights to Syria as part of a peace agreement.

Syria's Vice President Farouk al-Shara said yesterday that Damascus is interested in a peace process that will restore the Golan Heights to Syria "all the way back to the lines of 4 June, 1967.

"A peace process that will not achieve this goal is unacceptable," the Syrian official said.

Al-Shara also said that both Iran and Syria should be involved in solving the crisis in Iraq, in response to the Baker-Hamilton report's recommendation that Tehran and Damascus should be engaged to contribute toward stabilizing Iraq.