Hamas will not recognise Israel but will accept a Palestinian state on Palestine territories occupied by Israel in the 1967 Arab-Israeli war, the Islamic militant group’s exiled leader said today.

The statement by Khaled Mashaal in Damascus amounted to a tacit acceptance of Israel’s right to exist alongside a Palestinian state, but without explicit recognition. Hamas has previously called for the destruction of Israel, which occupied the West Bank, the Gaza Strip and east Jerusalem in the 1967 war. Israel later declared the entire city of Jerusalem as its capital.

Mashaal, who spoke at a news conference, said that the future Palestinian state must have Jerusalem as its “genuine, sovereign capital. He did not say whether he meant the eastern, Arab, section or the entire city.

“We agree to a (Palestinian) state on pre-67 borders, with Jerusalem as its capital with genuine sovereignty without settlements but without recognising Israel,” Mashaal said.

Earlier, Jimmy Carter, the former US president, said that Hamas was prepared to accept Israel's right to “live as a neighbour next door in peace.” Carter met twice with Mashaal over the weekend.

"They said they would accept a Palestinian state on the 1967 borders if approved by Palestinians ... even though Hamas might disagree with some terms of the agreement," Mr Carter said during a speech in Jerusalem.

His speech capped a nine-day tour of the region, intended to break the silence between Hamas and the Western world. Hamas took control of Gaza in June 2007 after routing Fatah forces loyal to Palestinian Chairman Mahmoud Abbas. Israel considers Hamas to be a terrorist group and has largely shunned Carter because of his meetings with Hamas' leader-in-exile, Khaled Mashaal, and other Hamas figures in Syria last week.

Mr Carter said Hamas had also promised to let Gilad Shalit, the kidnapped Israeli soldier, send a letter to his parents, and said the militants had “made clear to us that they would accept an interim ceasefire in the Gaza Strip.”

But Israeli officials expressed doubts over Mr Carter’s ability to follow through on any agreement made with the Hamas.

“Any agreement that was reached between Carter and the Hamas leadership in Syria has no practical effect on the ground,” an official in the Israeli Foreign Ministry said.

Hours after Mr Carter’s statement, Sami Abu Zuhri, a Gaza-based Hamas official, added a caveat, stating that Palestinian refugees living in exile must take part in a referendum - a condition that cast doubt over the seriousness of the proposal.

Mr Carter said that Hamas would accept a peace deal reached in the current talks between Ehud Olmert, the Israeli Prime Minister, and Mahmoud Abbas, the Palestinian President – as long as the deal was brought before the entire Palestinian population in a referendum vote.

“Hamas will not undermine Abbas's efforts to negotiate an agreement and Hamas will accept an agreement if the Palestinians support it in a free vote," Mr Carter said.

The former US president also criticised Israel and the US for refusing to meet with Hamas. But Israeli officials called Mr Carter’s meetings with Hamas a “disgrace.”

The only Israeli cabinet member to meet with Mr Carter was Eli Yishai, the Minister of Trade and Industry.

Representatives in Mr Yishai’s office said that he would meet with Mr Carter again in the coming days.

“I would not call the Hamas comment today a serious step. I believe Hamas is toying with Mr Carter… they will never accept a peace deal,” one Israeli official said.

Recent polls indicate a steady decrease in support among Palestinians for the US-brokered peace talks.

Only 21 per cent of Palestinians remain supportive of the talks, according to a joint poll conducted by the Hebrew University's Truman Centre in Jerusalem and the Palestinian Centre for Policy and Survey Research in Ramallah this month.

Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas officially launched peace talks at a summit in Annapolis, Maryland late last year after seven years of violent deadlock. Both leaders have said they hope to complete an agreement by the end of 2008, but talks have achieved little so far.

Israeli air strikes pounded the Gaza Strip over the weekend, in retaliation to a slew of Hamas attacks on border crossings between Gaza and Israel.

There have been five attacks on checkpoints, which control the flow of humanitarian aid to Gaza, over the past ten days. Israel said that Hamas was attempting to sabotage aid to the Gaza Strip in a ploy to garner international sympathy, while Hamas said it was drawing attention to the plight of Palestinians living under the embargo.

Six Palestinian militants were killed and 13 Israeli soldiers wounded over the weekend, in the most recent round of violence.

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