By Jeffrey Heller and Matt Spetalnick
WASHINGTON (Reuters) - Israeli Prime Minister Benjamin Netanyahu warned the United States and other world powers on Tuesday not to allow Iran to retain the ability to enrich uranium, and urged Palestinians to recognize Israel as a Jewish state if they wanted peace.
Addressing the pro-Israel lobby AIPAC a day after White House talks, Netanyahu avoided any explicit criticism of President Barack Obama but underscored the main differences with him over U.S.-led nuclear diplomacy with Iran.
Netanyahu reiterated his firm opposition to the possibility that a final deal to curb Iran's disputed nuclear program would allow it to keep some technologies with bomb-making potential.
All of these must be dismantled, Netanyahu said, adding that diplomatic pressure on Tehran should be increased. That's the reverse of an easing of sanctions offered under an interim accord with the United States and five other world powers in November.
"Unfortunately the leading powers of the world are talking about leaving Iran with the capability to enrich uranium. I hope they don't do that, because that would be a grave error. It would leave Iran as a threshold nuclear power," he said.
In a pledge that signaled both willingness to strike Iran's nuclear sites as a last resort and refusal to yield on core peace terms with the Palestinians, Netanyahu told a cheering audience: "I will do whatever I must to defend the Jewish state of Israel."
But the hawkish Israeli premier, who has been accused of trying to scuttle Iran negotiations, stopped short of issuing any direct threat against Iran, Israel's arch foe.
Netanyahu's combative remarks followed talks in which he bluntly told Obama that he would never compromise on Israel's security even as the U.S. leader sought to reassure him on Iran nuclear diplomacy and pressure him on Middle East peace talks.
Iran denies seeking nuclear weapons. Israel, which unlike Iran has not signed the nuclear Non-Proliferation Treaty, is widely believed to have the region's sole atomic arsenal.
"STOP DENYING HISTORY"
Turning to the Palestinians, with whom Israel renewed peace talks last July under U.S. auspices, Netanyahu said he wanted an accord. However, he placed the onus on the Palestinians to recognize Israel as a Jewish state - something they have long refused to do.
"It's time the Palestinians stop denying history. Just as Israel is prepared to recognize a Palestinian state, the Palestinians must be prepared to recognize a Jewish state," Netanyahu said.
Palestinian President Mahmoud Abbas's administration says Israel's building of settlements in the occupied West Bank and East Jerusalem is the main obstacle to securing a deal to create an independent Palestinian state.
Warning that time was running out, Obama on Monday urged Netanyahu to make "tough decisions" to help salvage the faltering U.S.-brokered peace process aimed at reaching a framework agreement with the Palestinians and extending talks beyond an April target date for an elusive final accord.
Netanyahu received a warmer reception at the annual convention of the American Israel Public Affairs Committee, a venue for some of his most strident speeches.
Though the group's influence on U.S. Middle East policy remains strong, it is trying to show it has not lost its touch after a rare setback when the White House blocked its push for Congress to approve new Iran sanctions. Obama says new measures would derail diplomacy.
Taking the podium before Netanyahu, U.S. Senator Robert Menendez said he still sees his legislation to impose new sanctions as the best way to ensure Iran does not develop a nuclear weapon and to avoid the need to resort to military action. But he offered no timetable for reviving such a bill, which Obama - a fellow Democrat - has vowed to veto.
While Netanyahu's speech broke little new ground, he also used his appearance to condemn pro-Palestinian activists abroad that are campaigning to isolate Israel with a "boycott, divestment and sanctions" movement, or "BDS," in protest against Israel's treatment of the Palestinians.
"Everyone should know what the letters BDS really stand for: bigotry, dishonesty and shame," he said.
The movement has made some inroads in Europe but has barely gained traction in the United States.
Netanyahu even singled out actress Scarlett Johansson as someone who "should be applauded" for opposing the movement, which he condemned as driven by anti-Semitism.
The issue grabbed headlines over a multi-million-dollar sponsorship deal between Johansson and SodaStream, an Israeli firm operating in the West Bank. She announced in late January she had quit as a global ambassador for Oxfam, which had said Johansson's association with SodaStream was incompatible with her role for the charity.
(Additional reporting by Patricia Zengerle and Will Dunham; Writing by Matt Spetalnick and Dan Williams; Editing by Crispian Balmer and Bernadette Baum)