Prime Minister Benjamin Netanyahu said Wednesday that Israel has no intention of dismantling the West Bank separation fence, which he called "a critical component of Israel's security."

"The separation fence will remain in place and will not be dismantled," Netanyahu told Knesset members.

Media reports in Israel on Wednesday indicated that the Palestinian Authority had relayed to U.S. President Barack Obama a demand that the fence be removed since the security situation in the West Bank had improved.

Palestinian chief negotiator Saeb Erekat told Reuters he had approached the United States on the issue. "The Israelis know that the wall adds to the complexities. It's part of the problem and not part of the solution," he said.

Netanyahu told lawmakers in the Knesset that the fence should be credited with restoring security and preventing the entry of Palestinian suicide bombers into Israeli towns. As a result, the fence should remain in place, the premier told MKs.

"I hear they are saying today that because it's quiet, it's possible to take down the fence. My friends, the opposite is true... It's quiet because a fence exists."

In his speech, Netanyahu said Israel welcomed "a certain improvement in the functioning of Palestinian security forces" in the West Bank. But he added: "The fence is important."

The prime minister was summoned to the Knesset after 40 MKs from the opposition parties signed a query requiring him to provide explanations for his diplomatic and economic policies.

Netanyahu also told the lawmakers that his government's defense policy had successfully deterred Palestinian Hamas gunmen in Gaza from launching Qassam rockets.

Israel's threat of responding to every rocket fired from Gaza was an effective change of policy that the prior regime did not implement, Netanyahu said.

"We are not ready to accept rocket and missile fire on the territory of the state of Israel," Netanyahu said. "From the moment I entered the prime minister's post there has been a response against every instance of shooting."

"This is the correct policy," Netanyahu said. "We cannot accept missile fire on Israeli cities as a fait accompli."

The prime minister added that Israel would insist on "effective demilitarization" of a future Palestinian state, and that an end to the conflict could only be reached in exchange for an end to all claims against Israel.

Netanyahu said Iran remains Israel's most pressing threat. The Tehran regime has not wavered from its intention to build a nuclear weapon, the prime minister said.

Israel is working to enlist wide swaths of the international community in forming a "united front" against Iran, which features "a brutal regime that oppresses its people," Netanyahu said.

Dramatic drop in West Bank attacks since fence built

Work on the barrier began in 2002, the height of a Palestinian uprising. Israel said the project was necessary to stop suicide bombers from reaching its cities. Palestinians called it a land grab that could deny them a viable state.

There has been a dramatic drop in the number of attacks in Israel over the past several years, a decrease security experts attribute to the barrier, Israeli and Palestinian Authority security steps and a change of tactics by some militant groups.

No suicide bombers have struck this year. In 2008, one person was killed in Israel by a bomber whom authorities said infiltrated from the West Bank through an area where the barrier had not been completed.

The International Court of Justice, in a non-binding decision in 2004, said the barrier was illegal and should be taken down because it crossed occupied territory.

The barrier, mainly razor-wired tipped fences but also comprises towering concrete walls, snakes through land Israel captured in the 1967 Six-Day War.

Five conditions for peace

In his speech to Knesset, Netanyahu reaffirmed his government's five foundations for peacemaking with the Palestinians.

The following are Israel's demands, first voiced by Netanyahu last month, and the Palestinian position on each issue.

1. Palestinians must recognise Israel as a Jewish state.

Palestinians say such recognition could be perceived as abjuring a "right of return" for Palestinian refugees to land now in Israel. They say they are also mindful of the rights of Arab citizens of Israel.

2. Palestinian refugees must be resettled outside Israel.

Palestinians have long demanded that refugees who fled or were forced to leave in the war of Israel's creation in 1948 should be allowed to return, along with millions of their descendants. Yet Palestinian negotiators have signalled they would accept "a just and agreed-upon" solution for refugees as laid out in a UN resolution that mentions compensation for those who settle elsewhere.

3. The final peace agreement will end the conflict, and Palestinians can make no further demands on issues such as borders and refugees.

The Palestinians seek a final, lasting agreement that would meet all their national aspirations.

4. The Palestinian state must be demilitarised so as not to threaten Israel.

The Palestinians do not object to this demand, but say it should be discussed in negotiations with Israel.

5. Foreign backing, in the form of explicit international guarantees, for these security arrangements.

Again, the Palestinians say the issue can be sorted out in peace talks, as it was agreed upon in previous internationally backed agreements like the 2003 "road map".