Israel should pursue peace talks with Syria next year to help contain perceived threats from Iran's nuclear program and Hamas, says an internal Israeli government report, which also highlighted the need to halt Palestinian democracy. Compiled by Prime Minister Ehud Olmert's National Security Council (NSC) and published in part by an Israeli newspaper on Sunday, the report argues for "paying the heavy price" of an accord with Syria - the return of the Occupied Golan Heights in line with international law.

All Israeli presence on occupied land violates numerous UN resolution as well as international law.

A senior Israeli official involved in preparing the report said US President-elect Barack Obama should be asked to sponsor the negotiations with Syria, which were revived this year but have been conducted indirectly through Turkey.

"The most important actor for Israeli-Syrian peace talks speaks English, and his name is Obama. Without very positive and significant US involvement, the Syrian track, like the Palestinian track, will go nowhere," the official told Reuters.

"We favor speeding up the talks with Syria, in hope of a breakthrough," the official said, adding that the Golan "is not too high a price to pay" if Syria cuts off the Hamas and Hizbullah resistance groups and "scales back" its ties with Iran.

Syrian President Bashar Assad rejects such preconditions. But some foreign powers brokering his rapprochement with Israel have predicted that Syria will be more pliable if an accord is at hand. Assad has also called for a US role in the negotiations to provide momentum.

US President George W. Bush has largely shunned Assad over Syria's alleged meddling in Iraq, Lebanon and the Palestinian territories. Obama has backed dialogue with Syria, saying this could help stabilize the region and better secure Israel as it tries to cobble together a deal on Palestinian statehood.

The Israeli NSC report comes in the flux ahead of a February 10 election in which surveys predict a narrow win for right-wing former Prime Minister Benjamin Netanyahu over Olmert's heir-apparent, Foreign Minister Tzipi Livni.

Neither candidate has voiced much appetite for the revival of talks with Syria, which broke down in 2000 over Israel's refusal to withdraw from all of the Golan, occupied since the 1967 war.

But with Israel now keen to see Iran isolated over its nuclear program and fearing new wars against Lebanon or in the Hamas-run Gaza Strip, Olmert's successor may be forced to accept the NSC's recommendations on Syria.

"I don't think either [Netanyahu or Livni] would stop this track. It's too important," said the senior Israeli official.

A five-month-old Gaza truce was shattered by Israel on November 4 and the Palestinians may be on course for fresh civil strife over Islamist Hamas's demand that rival President Mahmoud Abbas, of the secular Fatah faction, submit to a new election in January. Hamas crushed Fatah in a 2006 parliamentary ballot.

The NSC report, as cited by Haaretz newspaper, warns that Abbas could "vanish" and urges Israel to "prevent an election in the Palestinian Authority, even at the cost of a confrontation with the United States and the international community."

Israel, which is assumed to have the Middle East's only atomic arsenal, has repeatedly hinted it could resort to force to deny Iran the means of making a bomb. But Israeli officials claim preference for US-led sanctions on Tehran to run their course.

Iran says its nuclear program is solely to generate electricity.

"There is a now a nine-month window for stepping up the sanctions and getting real results," the Israeli official said, citing Israeli intelligence assessments on progress in Iranian uranium enrichment and its vulnerability to the current economic crisis.

The NSC has also advised that Israel draw up a plan for contending with a nuclear-armed Iran, political sources said