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Prime Minister Benjamin Netanyahu said yesterday that he did not envision a negotiated Middle East peace agreement within the next two years, despite his Palestinian counterpart's declared intentions to set up infrastructure for a state by 2011.

Palestinian Prime Minister Salam Fayyad aims to build the institutions of a Palestinian state within a year and has said Palestinians could declare statehood unilaterally if the diplomatic deadlock continues.

Asked in an interview on American television if there can be a Palestinian state by 2012, Netanyahu said: "I think there can be a solution. It may be implemented over time, because time is an important factor of getting the solution, both in terms of security arrangements and other things that would be difficult if they're not allowed to take place over time."

"Can we have a negotiated peace? Yes. Can it be implemented by 2012? I think it's going to take longer than that," he told Fox News on Sunday.

Netanyahu met with U.S. President Barack Obama at the White House last Tuesday, with both leaders saying they hoped face-to-face Israeli-Palestinian negotiations would begin soon.

Israel and the Palestinians are negotiating indirectly through Obama's special Middle East envoy, George Mitchell. Netanyahu promised publicly in Washington to take "concrete steps" within weeks to persuade the Palestinians to advance the peace talks.

The prime minister said yesterday that he would travel to Egypt this week for talks on the matter with President Hosni Mubarak.

'Tehran's ambitions cannot be contained'

During the Fox interview, Netanyahu called Iran "the ultimate terrorist threat today," telling the U.S. television station it was a mistake to think Tehran's nuclear ambitions could be contained. Netanyahu told his interviewer that Iran was "just moving on with its efforts" to develop nuclear weapons - a prospect he called "very, very dangerous."

Asked whether he thought a nuclear Iran could be contained, he said: "No, I don't. I think that's a mistake, and I think people fall into a misconception."

"I don't think you can rely on Iran," Netanyahu added, in the taped interview. "And we should not allow irrational regimes like Iran to have nuclear weapons. It's the ultimate terrorist threat today."

Netanyahu declined to say whether he had any deadline for allowing diplomacy with Iran to run its course. "We always reserve the right to defend ourselves," he said, reiterating a core policy of Israel.

While Iran says its nuclear program is for peaceful purposes only, the United States and its allies fear Tehran is pursuing an atomic weapons program and have pushed a series of United Nations and unilateral sanctions against Iran.

"There's only been one time that Iran actually stopped the program and that was when it feared U.S. military action," the prime minister said.

"So when [Obama] says that he's determined to prevent Iran from developing nuclear weapons and that all options are on the table, I think that's the right statement of policy."

Nuclearweapon-free zone?

Netanyahu did not directly respond to a question about a nuclear weapon-free zone in the Middle East, but accused Iran, Iraq and Libya of violating a non-proliferation pact.

"I think we should stay focused on the real problem in the Middle East," he said. "It's not Israel. It's these dictatorships that are developing nuclear weapons with the specific goal of wiping Israel away."