SNAP ANALYSIS - Netanyahu bends on statehood but not settlements

By Jeffrey Heller and Adam Entous

JERUSALEM (Reuters) - Israeli Prime Minister Benjamin Netanyahu gave ground on Sunday by conditionally accepting a U.S.-backed goal of a Palestinian state, but dug in on settlements, setting the stage for friction with Washington.

Netanyahu seemed to harbour hopes that his comments on statehood would persuade U.S. President Barack Obama to ignore settlement building in the occupied West Bank and not pursue a freeze that could bring down Israel's right-leaning coalition.

The Israeli leader had not publicly endorsed the creation of a Palestinian state, an objective Obama reaffirmed in a June 4 address to Muslims.

In his speech, Netanyahu spoke for the first time of a Palestinian state but conditioned its establishment on Israel receiving in advance international guarantees the new nation would be demilitarised.

Palestinian officials did not rule that out, saying after Netanyahu spoke that the issue would need to be settled in peace negotiations.

Israeli political scientist Eitan Gilboa said Netanyahu's statehood remarks could narrow a rare rift between Israel and the United States, its main ally.

"If (Obama) looks at the glass as half-full, this should be sufficient. But if he is looking for confrontation with Israel, he would say the glass if half-empty," Gilboa said.

Before Netanyahu's policy speech, American officials had made clear that Obama, seeking to mend U.S. relations with Muslims, would not back down over settlements.