Ladies and Gentlemen,

I see a lot of old friends here tonight. I especially want to welcome our distinguished guests from the United States: Former President Clinton, Governor Schwarzenegger and Senator Lieberman. And of course the founder of the Forum, Haim Saban and the Director of the Saban Forum, Martin Indyk. Welcome to Jerusalem. I am pleased to see you back here with us again.

The presence of so many prominent American leaders at this forum is an expression of the enduring friendship between the United States and Israel. This friendship rests on our deepest shared values – to nurture national and personal freedom, to defend these freedoms and the aspiration to live in peace.

Last week, in Washington, I spoke about Israel’s commitment to peace with the Palestinians. I said that I want to begin peace negotiations immediately and that these negotiations should be a good faith effort to reach a final peace agreement. Let me be clear: I am not interested in negotiations for negotiations sake. We are interested in reaching a peace agreement with the Palestinians, and we are prepared to make generous concessions in exchange for a genuine peace that ends the conflict between us and our neighbors, and one that protects Israel’s security.

The way to achieve peace is through negotiations, cooperation and the agreement of both sides. We see the fruits of the cooperation of both sides in the economy and with regard to security. It will be possible to see it soon in the political field as well.

That is why there is no substitute for negotiations between Israel and the Palestinian Authority, and any unilateral attempt outside that framework will unravel the existing agreements between us, and could entail unilateral steps by Israel.

The only way to achieve peace is through resolving all our issues around the negotiation table. We know it is not easy. President Clinton hosted me and the then-Head of the Palestinian Authority at Wye Plantation. It wasn’t easy, but it did lead to an agreement. I think we have all been put to the test, each of us in our own field, whether as a member of the government or the Knesset or the Senate or Congress. There is no other way to reach agreements that stand the test of time. Anything else doesn’t ultimately provide the same benefits, and these benefits can be great.

For Palestinians, peace will mean the dignity that comes from an independent national life and living standards that skyrocket from cooperation in tourism, trade, the economy and many other fields.

In the age of peace, we will see towers rather than missiles rising up from the Palestinian territories. When travelling on Highway 443 between Tel Aviv and Jerusalem, you will turn your head slightly left and see it. There are already plans for neighborhoods, for urban rivers, that can be developed. We are interested in helping and we will.

When there is a prosperous and growing Palestinian economy, thousands of jobs will be created, and that will help eliminate the scourge of poverty and desperation. It will strengthen internal forces within Palestinian society that oppose terrorism. This is already happening. I understand that some of you have been to Ramallah or other cities, and you see the remarkable differences. This is not an alternative to political peace, but it does help.

I see Ronald Cohen here. You did a great deal to help with this matter, and we are also working on it know.

It is already clear how the steps we have taken to ease the freedom of movement in the West Bank, and an improvement in the quality of life have made a tremendous contribution. It has made a difference in the Palestinian economy quite quickly. There were those who doubted that it would, but the results of this assistance are clear today. The Palestinians are also taking their own steps and that is very important. But all this prosperity would have been impossible had we not taken these steps towards cooperation. I am also impressed by the improvement in the functioning of the Palestinian security forces. We must add the component of political peace to economic and security improvements. These are the three bases that can stabilize the peace.

For Israel, peace would mean the realization of a dream of ages. Our sons and daughters would not know the wars of their fathers. Our economy is coming along very nicely, but it too would benefit from a ubiquitous sense of stability and hope that the age of peace would provide. And we could invest so much more in other areas of Israeli life, from infrastructure and education to science and culture – in short, allowing us to provide a better, more prosperous and complete life for ourselves and our neighbors.

The benefits of peace are clear. What would it take to advance peace? First of all, we need to start negotiations immediately in a positive spirit. I would even say a generous spirit. I speak of our side. I spoke of this in Washington, both before the Jewish Federations of North America and during the long conversation I had with President Obama. We are not setting any preconditions for dialogue. We have taken steps, and are willing to take further steps that would help launch a political process. However, we cannot waste time. We know that this is true. We will need to discuss a great many important and complex subjects in order to complete the process, and eventually we will need to resolve them because there is no substitute for leaders’ courage.

People always talk about the courage needed to be a leader in Israel, and it’s true. But we must also remember that the Palestinian leaders need courage. There is no substitute for that either, but before that we need to start talking. If we do begin a dialogue, we can surprise the world. These talks will of course need to tackle security issues.

Tonight I want to discuss three central challenges to Israel’s security that must be addressed to achieve our goal of a lasting peace.

First, Iran must be prevented from developing a nuclear military capability. Second, a solution must be found to the threat of missile and rocket attacks. And third, Israel’s right to defend itself must be preserved not only in principle but in practice.

Iran’s pursuit of nuclear weapons threatens our security, the chances for peace in the Middle East and global stability.

With nuclear weapons, its powers of destruction, already considerable, would grow immensely. The moderates in the Middle East would be weakened and extremists strengthened. Other countries in the region would join the race for nuclear weapons. An Iranian regime that pledges to wipe Israel off the map would work day and night to undermine any attempt to advance peace between Israel and its neighbors – whether it is peace with the Palestinian Authority, with Syria and with anyone else.

In contrast, if Iran’s nuclear ambitions are thwarted, peace would be given a dramatic boost. Hezbollah and Hamas would be considerably weakened and moderate forces within the region would quickly become ascendant.

This is why the fate of Iran’s nuclear program is a true turning point in history. It would significantly influence our ability to achieve a stable and secure peace in the Middle East. A stable and secure peace in the Middle East is important to the entire world.

Last week, I discussed with President Obama his continuing efforts to mobilize the international community to prevent Iran from developing nuclear weapons. I also heard from American Senate leadership – Joe Lieberman was at that meeting – about their bipartisan efforts to strengthen sanctions on Iran – sanctions that could seriously hamper the dictatorial regime’s ability to import refined petroleum and its capacity to stifle freedom of information on the internet to Iranian citizens. These two things are very influential. The head of a committee of 22 Senators told me that they unanimously agreed on this legislation. He told me that was impossible for them to agree that the sun would rise in the east tomorrow, but they agreed about this unanimously.

In Paris, President Sarkozy reiterated to me his determination to oppose Iran’s nuclear ambitions, a determination shared by German Chancellor, Angela Merkel, whom I will meet later this month in Berlin.

A growing number of world leaders are waking up to the dangers of a nuclear Iran but there is no time to waste. For the sake of peace and security, the international community must stand firmly behind its demands that Iran stop its nuclear weapons program, and must be prepared to immediately apply strong sanctions if those demands are not met, preferably in the framework of the Security Council. If this is not possible, there is an alternative – strong sanctions may be applied by a broad coalition of important countries that understands the seriousness of the threat.

The second challenge to peace is the threat to Israel of missile and rocket attacks on Israel.

All it takes is one crude rocket hurtling through the air to sow fear in an entire city. Israelis have braved this intolerable threat for years, first in Kiryat Shmona and Sderot, later in Acre, Nahariah, Haifa, Ashkelon, Ashdod and Beer Sheva.

After Israel withdrew unilaterally from South Lebanon in 2000 and from Gaza in 2005, both areas were turned into Iranian backed terrorist bases from which thousands of rockets were fired into Israel’s towns and cities.

Peace requires that any future peace agreement have effective demilitarization measures that can neutralize the missile threat.

There has been much talk about the precise demarcation of the future border separating Israel and the Palestinians. Undoubtedly, that is an important question that can only be resolved through negotiations between the two sides.

The framework of these negotiations is determined in United Nations Resolution 242 clearly, which clearly states that negotiations must provide Israel with secure and recognized borders.

But we must also understand that because of the threat posed by short-range rockets and mortars – which is the vast majority of missiles and rockets – launched from contiguous territory, Israel’s security is not merely a question of the future borders of the Jewish state. No less important, our security depends on ensuring that dangerous weapons do not pass through the borders of a future Palestinian state.

We have seen how a neighbor’s porous borders can endanger our security. Look at the Lebanese example: despite Security Council Resolution 1701, Lebanon’s border with Syria remains porous, and through them Iran and Syria continue to send weapons directly to Hezbollah. Today, Hezbollah has at least three times the number of rockets it had at the end of the Second Lebanon War. It is not only rockets and missiles, but also a wider range of warheads in greater numbers.

So far, the only thing that has proven effective at reducing the flow of these weapons is direct Israeli action. Just last week, we interdicted a ship sent from Iran bound for Hezbollah with 500 tons of weapons on board. This is part of an ongoing broader Israeli effort to prevent weapons smuggling to areas controlled by Hezbollah and Hamas.

And with regard to Gaza: when Israel controlled the Philadelphi Corridor, we stopped most, though not all, of the smuggling from Sinai into Gaza. But after we left, hundreds of tunnels were dug – there are nearly one thousand today, and the flow of rockets into Palestinian territory became a flood.

The lessons of Lebanon and Gaza cannot be ignored. Any peace agreement with the Palestinians must ensure effective security arrangements to prevent the flow of missiles and other weapons into the West Bank.

This cannot be left to paper agreements alone, however strongly worded or well intentioned. It must be backed by powerful concrete security measures on the ground. That is a prerequisite to an enduring peace.

In addition, we are working closely with the United States to develop missile defenses that may in time largely neutralize this threat. I appreciate the Obama Administration’s continued support of these joint efforts, as well as the support of the Administrations that preceded this one. I spoke of this with the President when in Washington and expressed the appreciation of Israel’s citizens.

The third challenge to peace is the attempt to deny Israel the right to self-defense. The UN Goldstone report on Gaza attempts to do that.

Before Israel left Gaza, many argued that the missile attacks would stop following the withdrawal. But even if they didn’t, it was argued at the time, Israel would have clear international legitimacy to respond to those attacks.

Unfortunately, both those assumptions proved false. Thousands of rockets were fired on Israel. And when Israel finally responded, far from winning international legitimacy, it was accused of war crimes.

The Goldstone Report is a clear threat to peace in our region. Achieving a final peace settlement with the Palestinians will require territorial compromise. But how can Israel be asked to vacate additional territories if we cannot defend ourselves against attacks from that territory?

Be assured that this UN report is not Israel’s problem alone. It threatens to handcuff all states fighting terrorism. For if terrorists believe that the international community will justify their crimes when they fire on civilians while hiding behind civilians, they will employ this tactic again and again.

Perhaps the most important moral distinction in the laws of war is that between the deliberate targeting of civilians and the unintended casualties that are the tragic consequence of wars, even those that are carefully waged.

Israel made and makes this moral distinction in order to prevent harming innocent civilians. During Operation ‘Cast Lead’, the Israeli Defense Forces dropped more than two million fliers, made 165,000 phone calls, sent thousands of text messages and called off countless military operations to evacuate Palestinian civilians from targets from which the Hamas fired missiles and rockets on Israel.

In contrast, the Hamas terrorists wiped this distinction away. They embedded themselves within the civilian population, routinely used Palestinian civilians as human shields, and targeted as many Israeli civilians as possible.

What can a responsible government do when faced with such tactics? It should always seek to minimize civilian casualties in territories controlled by the enemy. But they also have an obligation to defend their citizens.

So when terrorists embedded in civilian areas deliberately launch attacks on the innocent, governments cannot become paralyzed. They must respond with the minimal force necessary to end the attacks. That is the truest interpretation of the laws of war. One must minimize civilian casualties, but act with the force necessary to stop such attacks. Both sides of this equation are forgotten in the Goldstone Report. Never mind what they forgot with regard to the Hamas. They forgot that responsibility for the unintended civilian casualties such an operation entails should be place squarely on the terrorists and not on the defending government.

The war on terror obligates military action and the courage of soldiers and commanders – which we have in abundance – but above all, it demands the moral clarity of leaders.

From my conversations with many leaders around the world, this observation is understood. That is why I have hope that it will soon become the prevailing norm.

Paradoxically, it is possible that the morally twisted Goldstone Report, which has received firm responses from important international leaders and jurists will eventually lead to the re-examination of the laws of war in an age of terror.

These three challenges – preventing a nuclear armed Iran, neutralizing the missile threat and reaffirming Israel’s right to self-defense – are critical for the pursuit of peace.

None of these challenges is insurmountable. Each challenge will be difficult in its own way, but they can be overcome. Given that peace would provide immense benefits to Israelis, Palestinians and to the region, they are challenges that we must overcome. God-willing, we will.

Thank you.