Israel sets demands in new Syrian peace track

By Jeffrey Heller

JERUSALEM (Reuters) - Israel set terms for concluding a peace deal with Syria on Thursday, closing ranks with Washington in demanding Damascus distance itself from Iran and stop supporting Palestinian and Lebanese militants.

Coordinated announcements on Wednesday by Israel and Syria that they had begun indirect talks in Turkey, the first confirmation of negotiations between the long-time enemies in eight years, drew a lukewarm response from the United States.

Summing up three days of discussions in Istanbul, Turkish Foreign Minister Ala Babacan said both sides were satisfied they had found "shared ground". He said future talks would be held periodically in Turkey.

"The Syrians know what we want and we know what they want," Israeli Prime Minister Ehud Olmert said in Jerusalem.

Syria has demanded the return of the Golan Heights, a plateau overlooking Damascus on one side and the Sea of Galilee on another, since Israel captured the strategic territory in the 1967 Middle East war.

Olmert, who recently took a vacation on the Golan Heights, has not said publicly that Israel would give up all of the area. But he has spoken of "difficult concessions" Israel would have to make in any land-for-peace accord with Syria.

Echoing U.S. comments, Israeli Foreign Minister Tzipi Livni said Israel wanted to live in peace with its neighbours but Syria needed to "distance itself completely" from "problematic ties" with Iran.

Syria, she told reporters, must also stop "supporting terror -- Hezbollah, Hamas", groups backed by the Islamic Republic.