ISRAEL NEEDS TO restart negotiations with Palestine.

That is according to US Defence Secretary Leon Panetta, who warned that Israel is becoming increasingly isolated in the Middle East, and said Israeli leaders must restart negotiations with the Palestinians and work to restore relations with Egypt and Turkey.

Panetta said the ongoing upheaval in the Middle East makes it critical for the Israelis to find ways to communicate with other nations in the region in order to have stability.

The Jerusalem Post reports that Panetta’s underlying message on Iran was that Israel should not ‘surprise’ the US by taking unilateral action against Iran’s  nuclear programme.

In an interview with CNN broadcast yesterday, Panetta accused Iran of working to undermine governments in the Middle East.

Panetta is scheduled to meet this week with Israeli and Palestinian leaders, and then travel to a meeting of NATO defense ministers in Brussels.

The Pentagon chief said:

It’s pretty clear that at this dramatic time in the Middle East, when there have been so many changes, that it is not a good situation for Israel to become increasingly isolated. And that’s what’s happening.

He added the most important thing now is for Israel and its neighbours “to try to develop better relationships so in the very least they can communicate with each other rather than taking these issues to the streets.”

His visit comes after Palestinian President Mahmoud Abbas has asked the UN Security Council to recognise an independent Palestinian state in the West Bank, east Jerusalem and Gaza Strip, areas captured by Israel in the 1967 Mideast war.

The United States opposed the UN bid, saying there is no substitute for direct peace negotiations.

The United States, Britain, France and other council members are likely to try to hold up consideration of the application while they press for a resumption of Israeli-Palestinian negotiations, diplomats said.

Negotiators, known as the Quartet, are asking both the Israelis and the Palestinians to produce comprehensive proposals on territory and security within three months.

Israeli officials have welcomed parts of the proposal, but have also expressed concerns about the timetable for some discussions.

They also have refused to endorse the 1967 prewar borders as a basis for the future Palestinian state — something President Barack Obama has endorsed.

The Palestinians, meanwhile, have said they won’t return to talks unless Israel freezes settlement building and accepts the pre-1967 war frontier as a baseline for talks.

Just last week, Israel approved the construction of 1,100 new housing units in an area of Jerusalem built on land captured in 1967, a move that drew widespread international condemnation.

Panetta said he wants to stress to both sides that instead of setting conditions or pursuing other approaches:

… the most important thing they can do is go to the negotiating table. That would be a tremendous signal to the world that both the Israelis and the Palestinians want to try to find a solution to these problems. I don’t think they really lose anything by getting into negotiations.

The US has said it would veto the Palestinians’ UN request, despite the high political cost in the Arab world.

However, Washington would not need to use its veto if the Palestinians fail to get the support of at least nine of 15 council members.

- Additional reporting by AP