Obama tells Arabs and Israel to support fragile talks

UNITED NATIONS (Reuters) - U.S. President Barack Obama urged Israel on Thursday to extend its partial freeze on settlement-building and Arab states to move towards normal ties with the Jewish state to help keep fragile peace talks alive.

Speaking at the U.N. General Assembly three weeks after Israeli and Palestinian officials resumed direct peace talks, Obama urged world leaders to make sure "this time is different" from previous failed efforts to end the six-decade conflict.

The U.S. president spoke on the opening day of the annual, 192-nation gathering amid global disagreements on issues from Iran's nuclear program to a maritime dispute between Japan and China and a U.S.-China currency spat.

In talks on the sidelines of the U.N. meeting, Obama urged Chinese Premier Wen Jiabao to take rapid steps to address the dispute over the yuan's value, U.S. officials said, making clear he wants it to rise further and faster.

The U.S. president also told Iran the United States remained open to diplomacy to resolve questions about its nuclear program, which Washington believes aims to develop weapons despite Tehran's denials.

But U.S.-Iranian animosities resurfaced almost immediately when Iranian President Mahmoud Ahmadinejad told the assembly most people believe the U.S. government was behind the attacks of September 11, 2001, on the World Trade Centre and the Pentagon.

That prompted a walkout by the U.S. and several European delegations, which have also walked out during past speeches by Ahmadinejad at the United Nations because of anti-American or anti-Israeli comments.

Speaking about four miles (6 km) from the Ground Zero site where the World Trade Centre once stood, Ahmadinejad gave no hint of interest in Obama's offer of a diplomatic solution to the nuclear dispute.

Obama devoted much of his somewhat subdued, roughly half-hour speech to the Israeli-Palestinian conflict.

The U.S.-brokered talks are in danger of collapsing almost before they have begun because of the September 30 expiration of Israel's self-imposed, partial moratorium on new construction in Jewish settlements on the occupied West Bank.

Israel's refusal so far to maintain the freeze -- and the Palestinians' threat to walk out if it does not -- have imperilled the negotiations, which aim to resolve the main issues in the conflict within a year.

"We believe that the moratorium should be extended," Obama said. "We also believe that talks should press on until completed. ... Now is the time for this opportunity to be seized, so that it doesn't slip away."

GLOBAL MESSAGE

Obama, who brought the Israeli and Palestinian leaders together in Washington on September 2 to restart direct talks after a 20-month hiatus, argued that Arab states must show Israel how much it has to gain from seeking peace.

He urged countries that back the Palestinians to follow through with political and financial support and said they "must stop trying to tear Israel down" and take "tangible steps" towards normalization with the Jewish state.

Israeli Prime Minister Benjamin Netanyahu, whose coalition government is dominated by pro-settler parties, has said he will not extend the construction moratorium but could limit the scope of further building in some settlements.

Israel's delegation was absent from the assembly hall, but a spokeswoman for the Israeli U.N. mission said it was due to the Jewish holiday of Sukkoth. "It's not a boycott," she said.

The African Union urged the United Nations to put genocide and war crimes charges against Sudan's leader on hold, warning they could destabilize Africa's biggest nation and endanger an upcoming referendum on southern independence.

Malawian President Bingu wa Mutharika called for a one-year deferral of the International Criminal Court case against President Omar Hassan al-Bashir, charged with crimes in Sudan's western Darfur region.

(Additional reporting by Alister Bull and Lou Charbonneau at the United Nations and Allyn Fisher-Ilan in Jerusalem; Writing by Arshad Mohammed and Patrick Worsnip; Editing by Eric Walsh)