Syria has said it wants direct talks to seal a peace deal with Israel if the Jewish state withdraws from the strategic Golan Heights border region it captured in the Six Day War 40 years ago.

The peace overtures from Syria's ambassador to the United States came as Ehud Olmert, the Israeli prime minister, poured cold water on hopes of a quick deal with the Palestinians, ruling out an agreement on the key issue of Jerusalem by the end of this year.

Mr Olmert's statement was the first public admission by an Israeli leader that President George Bush's prediction of an accord being signed by the end of 2008 was overly optimistic.

He was also cautious about the offer of face-to-face talks with Syria, telling a weekly cabinet meeting that Damascus continued to support the Hezbollah militia movement in Lebanon and had close ties to Iran.

In Washington, Moustapha Imad, the Syrian ambassador, told an American group linked to an Israeli anti-settlement organisation that Syria was willing to cut a final peace deal with Israel, eight years after the last round of negotiations collapsed.

“We desire to recognise each other and end the state of war,” Mr Moustapha said. "Here is, then, a grand thing on offer. Let us sit together, let us make peace, let us end once and for all the state of war."

Israel and Syria have both recently acknowledged that they have been holding indirect talks for the past year through the mediation of Turkey.

Mr Moustapha is a close confidant of Bashar al-Assad, the Syrian president, and analysts said the comments would not have been made without the leader's approval. Two weeks ago, Mr Assad himself said he wanted to have "normal" relations with Israel, including the opening of embassies.

Israel and the United States want to break Syria away from its long-standing and close alliance with Iran, and thereby to cripple support for Hezbollah, which receives arms from both. Syria, on the other, appears to be seeking a way to emerge from the diplomatic doghouse after years of isolation which have severely undermined its economy.

But some analysts believe that Mr al-Assad, a London-trained ophthalmologist who came to power on the death of his father in 2000, may be trying to play the two sides off against each other in a bid to consolidate his power in Syria, still a police state despite some reforms under the young president.

Polls show that most Israelis oppose relinquishing the Golan Heights, a high plateau overlooking the Sea of Galilee, the country's main water resource. Some 20,000 Israelis have settled in the area since it was captured in the 1967 war.

Mr Moustapaha said talk could open the door to a regional settlement between Israel and its neighbours. "The negotiations are a historic opportunity for Israel to make peace, not just with Syria and Lebanon, but with the whole Arab world," he said, in comments carried in the Israeli media.

While Mr Olmert was gloomy about reaching an agreement this year on Jerusalem, which both Israel and the Palestinians claim as their capital, he said a partial deal might be achievable within Mr Bush's timeline.

Mr Olmert, whose own political future looks shaky as police investigate him over corruption allegations, said: "I don't believe that it's possible to reach an agreement on Jerusalem before the end of the year. But on the other core issues, the gaps are not dramatic."

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