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WASHINGTON (AP) _ Reaching out to the Arab world, President Bush renewed his call Tuesday for a Palestinian state and said Israeli Prime Minister Ariel Sharon should keep pulling back on the West Bank.

Bush, in an exchange with reporters while seeing King Mohammed VI of Morocco in the Oval Office, also insisted that Palestinian leader Yasser Aafat renounce and fight terror. But the weight of his remarks seemed to respond to Arab demands.

``Our government means what we say, and we said that the only way for there to be lasting peace is for there to be two states, living side by side with each other.''

On Thursday, Bush will receive Crown Prince Abdullah of Saudi Arabia, whose proposal for a settlement between Israel and the Arabs already has been embraced by the president.

It would have Israel turn over the land the Arabs lost in the 1967 Mideast War in exchange for pledges of peace and recognition.

Bush said Sharon, Arafat and other parties had responsibilities to achieve a two-state solution to the Arab-Israeli conflict.

Arafat must combat terror and Sharon must step up the withdrawal of Israeli troops from the West Bank, where their hunt for terror suspects and illicit ammunition has angered most European and Arab governments.

Sharon has tarried, giving Israeli forces more time. Late Monday, an Israeli helicopter attacked a car carrying Marwan Zalloum, the commander of the Al Aqsa Martyrs' Brigade militia. Zalloum and his bodyguard were killed in the attack.

The Israeli military said Zalloum was responsible for dozens of attacks, including an April 12 suicide bombing in Jerusalem that killed four Israelis and two Chinese workers, as well as a shooting attack on a Jewish settlers' enclave in Hebron in which a baby girl was killed last year.

Sharon said Tuesday Israel's campaign against terror on the West Bank opens the door to peacemaking with the Palestinians.

Renewing his call for an international peace conference, which Bush is weighing, Sharon said Tuesday that Israel would pursue a peace with the Palestinians in stages.

But Bush said it was only one of many options he was exploring. The key, he said during talks with King Mohammed VI, is for government leaders to work toward the vision of peace with two states, Israeli and Palestinian.

The king, urging a more vigorous U.S. role, said, ``We have to shift the gear to go into higher speed.'' He also pledged Morocco's support in the U.S.-led campaign against terrorism.

He thanked Bush for sending Secretary of State Colin Powell to the region two weeks ago and said ``we are beginning to see the results,'' an apparent reference to Israel's pulling back its forces from the West Bank.

Sharon, detailing his three-step plan, said that first there must be a complete cessation of violence and incitement to attack Israel. Then, he said, Israel would be prepared for a long-term armistice with the Palestinians. In a third stage, Israel and the Palestinians would reach a final settlement.

He said borders would be drawn, implying his approval of a Palestinian state, which Bush has been urging.

``Regional peace is within our grasp,'' Sharon said via television to the annual convention of the American Israel Public Affairs Committee, a pro-Israel lobby group. ``I am optimistic about the future.''

Israel's three-week incursion into Palestinian areas ``has opened a window of opportunity to put the peace process back on a different moralistic track, free from the threat of terrorism,'' Sharon said.

The issue of an international conference to restart the Mideast peace process was raised during Powell's trip to the region this month. Powell said such a meeting could restore hope, but the White House has not registered enthusiasm for the idea.

``I have proposed a regional peace conference to achieve this goal'' of regional peace, Sharon said. ``A regional peace conference sponsored by the United States can create the framework and mobilities to bring about a cessation of hostilities.

``It can foster a coalition of countries committed to peace and able to defeat the forces of terrorism and evil circling our lives.''

Israel received a bipartisan boost, meanwhile, from Rep. Robert Menendez, D-N.J., and Rep. Tom DeLay, R-Texas, the House majority whip.

``You will not hear silence, you will not hear neutrality,'' Menendez said.

DeLay called the Palestinian authority ``a holding company for terrorist subsidiaries'' and, bringing the audience to its feet, said ``democracies must never negotiate with terrorists.''