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In his first foreign policy speech since clinching the Democratic nomination in the U.S. presidential race Tuesday, Barack Obama asssured the American Israel Public Affairs Committee (AIPAC) Wednesday that he would not allow Iran to acquire nuclear arms, and that Jerusalem would remain the undivided capital of Israel.

"Let me be clear," Obama said, "Israel's security is sacrosanct. It is non-negotiable. The Palestinians need a state that is contiguous and cohesive and that allows them to prosper. But any agreement with the Palestinian people must preserve Israel's identity as a Jewish state, with secure, recognized and defensible borders. Jerusalem will remain the capital of Israel, and it must remain undivided," he added, in efforts to secure the Jewish vote.

Palestinian President Mahmoud Abbas, who is currently negotiating the establishment of a Palestinian state with Israel, lambasted Obama's remarks later on Wednesday, saying there would be no peaceful solution to the Middle East conflict without a resolution of the status of Jerusalem, which both sides claim as their capital.

"This statement is totally rejected," Abbas told reporters.

"The whole world knows that holy Jerusalem was occupied in 1967 and we will not accept a Palestinian state without having Jerusalem as the capital."

State Department spokesman Sean McCormack also distanced the U.S. government from Obama's remarks, saying any final decisions on the toughest issues in the peace talks were for Israel and the Palestinians to make on their own.

"It is for the parties to resolve these issues. And we are going to continue to do what we believe is right in terms of... helping to bring about peace, without respect to presidential politics," McCormack said.

In his speech, Obama alluded to a rumor campaign about his alleged Muslim roots and his inclinations on the Middle East issues, telling his audience they may have received e-mails telling "tall tales" about him.

"All I want to say is - let me know if you see this guy named Barack Obama, because he sounds pretty frightening," the presidential hopeful joked.

The Republican candidate for the presidency, John McCain, has assailed Obama in recent weeks on his previous statements suggesting a willingness to talk directly to Iranian President Mahmoud Ahmadinejad, who has called for Israel to be wiped off the map.

Obama has since said he would not guarantee a meeting with the Iranian president. He went a step further in the AIPAC speech by laying down conditions for what he said would be "tough and principled diplomacy" with Tehran.

"There will be careful preparation. We will open up lines of communication, build an agenda, coordinate closely with our allies, and evaluate the potential for progress," Obama said. "I have no interest in sitting down with our adversaries just for the sake of talking. But as president of the United States, I would be willing to lead tough and principled diplomacy with the appropriate Iranian leader at a time and place of my choosing, if and only if it can advance the interests of the United States."

Obama said the danger from Iran in the Middle East was "grave."

"I will do everything in my power to prevent Iran from obtaining a nuclear weapon - everything," he said to a standing ovation.

Regarding Hamas, Obama said that "we must isolate Hamas unless and until they renounce terrorism, recognize Israel's right to exist, and abide by past agreements," echoing the demands of the Quartet. "There is no room at the negotiating table for terrorist organizations."

McCain addressed the AIPAC conference on Monday, and promised to pursue tougher financial sanctions on Iran if he won the presidency. He also called for a worldwide divestment campaign against Iran aimed at curbing its nuclear ambitions.

Obama also criticized McCain during his address to AIPAC, for what he said was the Republican Senator's support for staying in Iraq, rather than a plan for victory in there.

"Keeping all of our troops tied down indefinitely in Iraq is not the way to weaken Iran, it is precisely what strengthened it," Obama told AIPAC.

"McCain offers a false choice: stay the course in Iraq or cede the region to Iran. ... It is a policy for staying, not a policy for victory," Obama said, adding he favors a phased withdrawal of troops from Iraq.

He said McCain refuses to understand or acknowledge the failure of the policy that he would continue. "He criticizes my willingness to use strong diplomacy, but offers only an alternate reality, one where the war in Iraq has somehow put Iran on its heels. The truth is the opposite.

"Because of the war in Iraq," he said, "Iran, which always posed a greater threat to Israel than Iraq, is emboldened, and poses the greatest strategic challenge to the United States and Israel in the Middle East in a generation."

Iraq, Obama said, "is unstable, and Al-Qaida has stepped up its recruitment."

Israel's peace efforts, he said, "have stalled, and America is more isolated in the region, reducing our strength and jeopardizing Israel's safety."

Also speaking at the AIPAC conference was Democratic Senator Hillary Clinton, who has not yet conceded the race and voiced strong support for Israel in her own remarks.

Obama and Clinton spoke Wednesday when they ran into each other backstage at the AIPAC meeting, Obama told reporters. Asked if Clinton indicated that she planned to concede, Obama replied, "It wasn't a detailed conversation." But he added that he is very confident of "how we're going to be able to bring the party together."

The former first lady is yet to concede defeat, although she is courting an invitation from Obama to become his vice presidential running mate.

Clinton followed Obama to the podium at AIPAC, delivering a strong defense of Israel and also of her rival, saying to applause: "Let me be very clear. I know that Senator Obama will be a good friend to Israel."