The leaders of Israel and Palestine agreed last night to start talks immediately, with the aim of ending their decades-old conflict within a year, as President Bush began his most ambitious attempt yet to bring peace to the Middle East.

In a dramatic opening statement read by Mr Bush to a huge gathering of Middle East nations, Ehud Olmert, the Israeli Prime Minister, and Mahmoud Abbas, the Palestinian President, pledged to begin the first serious peace talks in seven years, with the aim of creating a Palestinian state by the end of next year.

The two leaders indicated in their joint statement that continuous peace talks would begin on December 12, and that they would meet every fortnight until a comprehensive deal had been reached. “We express our determination to bring an end to bloodshed, suffering and decades of conflict between our peoples,” they said.

The statement followed days of tense negotiations leading up to the conference. It was not clear until Mr Bush stepped up to the podium in the US Naval Academy in Annapolis, Maryland, that the two sides would even agree to begin the talks, let alone within such a tight timeframe.

Mr Olmert pleaded for an end to the bloodshed before the assembled nations, which included Saudi Arabia, Syria and the Arab League. He said that Israel was willing to make “painful compromises rife with risks”. He added: “Many Palestinians have for years been living in camps with a deep, unrelenting sense of humiliation. We are not indifferent to this suffering . . . The time has come. We want peace.”

Mr Abbas said: “It is time for the circle of blood, violence and occupation to end. It is time for us to look at the future together with confidence and hope.” He added: “We should not lose this opportunity, which might not be available again.”

Both men said that the core issues that have blocked previous attempts at peace, such as the status of Jerusalem and the question of whether Palestinian refugees can return to Israel, will be on the table. But in a clear sign of the obstacles ahead, Mr Abbas gave no indication that the Palestinians were willing to concede on any of the issues, which include final borders and the existence of Jewish settlements. “I have the right to defend openly and with no hesitation the right of my people to see a new dawn, with no occupation, no settlements, no separation wall, no prisons with thousands of prisoners, no assassinations, no siege and no roadblocks around villages and cities,” Mr Abbas said.

Mr Olmert said that attacks on Israelis must end. In a call to all Arab nations, he said: “It is time to end the boycott and alienation toward the state of Israel.”

Mr Bush said that the Middle East had reached a critical moment and the failure to act now could leave the region in the hands of extremists — its people facing “endless terror, endless war and endless suffering”. Even as he spoke, however, problems emerged over Arab expectations about how far Mr Bush would go to forge a peace deal. Mr Bush said that he would not be involved in the negotiations.

However, Saud al-Faisal, the Saudi Arabian Foreign Minister, said that the Arab kingdom had agreed to attend the conference only after receiving White House assurances that Mr Bush would remain actively engaged after talks had begun.

Yet significant doubts remain about the ability of both Mr Olmert and Mr Abbas to bring peace. The Israeli Prime Minister is deeply unpopular and has political enemies vested in his failure. Mr Abbas now rules only parts of the West Bank. The militant Islamic group, Hamas, which wrested control of the Gaza Strip from Mr Abbas this year, said that he was an “isolated traitor” for attending the conference.

David Miliband, the Foreign Secretary, said: “There is a very strong feeling that it’s now or never. The commitment to open negotiations after seven years of deep freeze is significant.”

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