Washington: President Barack Obama on Sunday refused to back away from his new Middle East peacemaking vision that has angered Israel, as he addressed the Jewish state's staunchest American supporters amid a deep rift in US-Israeli ties.

But Obama, seeking to soothe Israeli fury over his stance that peace talks should start on the basis of Israel's 1967 borders, made clear he expected Israel and the Palestinians to negotiate land swaps that would allow Israel to keep some Jewish settlements.

Obama spoke to Washington's most powerful pro-Israel lobbying group three days after he endorsed a longstanding Palestinian demand on the borders of their future state that could require big Israeli concessions of occupied land.

The speech followed a testy encounter at the White House on Friday with Prime Minister Benjamin Netanyahu, who vowed Israel would never pull back to its old borders that he regarded as "indefensible".

Obama's appearance before the annual assembly of the American Israel Public Affairs Committee (AIPAC) served as a stark reminder that his new formula for Middle East peace could cost him support among Jewish and pro-Israel voters and donors as he runs for re-election in 2012.

"Even while we may at times disagree, as friends sometimes will, the bonds between the United States and Israel are unbreakable, and the commitment of the United States to the security of Israel is ironclad," Obama said to loud applause.

But at one point he faced a light smattering of boos, which were quickly drowned out by loud applause, when he touched upon some of the most controversial issues now dividing the United States and raising doubts whether Obama's peace vision will ever get off the ground.

Dim peace prospects

A week of hectic Middle East diplomacy has laid bare the divide between the Obama administration and one of Washington's closest allies and made the prospects for reviving the moribund Israeli-Palestinian peace process more remote than ever.

In Sunday's speech, Obama reiterated the peace "principles" he outlined on Thursday in a policy speech on upheaval in the Arab world, but he sought to assuage Israeli concerns that had caused Netanyahu to warn him against pursuing peace "based on illusions."

At issue is Obama's embrace of a long-sought goal by the Palestinians: that the state they seek in the occupied West Bank and Gaza Strip should largely be drawn along lines that existed before the 1967 war in which Israel captured those territories and East Jerusalem.

The proposal would call for land swaps to compensate for Israel keeping some settlements in the West Bank. "By definition, it means that the parties themselves - Israelis and Palestinians - will negotiate a border that is different than the one that existed on June 4, 1967. That's what mutually agreed upon swaps means," Obama said.

"It allows the parties themselves to account for the changes that have taken place over the last forty-four years. It allows the parties themselves to take account of those changes, including the new demographic realities on the ground and the needs of both sides," he said.

Obama's reassurances could help ease strains with Netanyahu, who has had a history of tense relations with the president. Obama's stress on 1967 borders went further than before in offering principles for resolving the impasse between Israel and the Palestinians and put the United States formally on record as endorsing the old boundaries as a starting point.

Israeli Culture Minister Limor Livnat of Netanyahu's right-wing Likud party welcomed Obama's clarification of his position as "important words."