* China's Wen, Obama discuss spat over currency
* Wen, in speech, stresses China's focus on jobs
* Iran's Ahmadinejad raises 9/11 conspiracy theories (Adds Ahmadinejad, African Union speeches)
By Lesley Wroughton and Steve Holland
UNITED NATIONS, Sept 23 (Reuters) - U.S. President Barack Obama urged Israel on Thursday to extend its partial freeze on settlement-building and Arab states to move toward normal ties with the Jewish state to help keep fragile peace talks alive.
Speaking at the U.N. General Assembly three weeks after Israeli and Palestinian officials resumed direct peace talks, Obama urged world leaders to make sure "this time is different" from previous failed efforts to end the six-decade conflict.
Obama and Chinese Premier Wen Jiabao met on the sidelines of the 192-nation gathering to discuss their currency spat, with U.S. officials saying the president stressed his desire for the yuan to rise further and faster. [ID:nN23131845]
The U.S. president also told Iran the United States remained open to diplomacy to resolve questions about its nuclear program, which Washington believes aims to develop weapons despite Tehran's denials.
But U.S.-Iranian animosities resurfaced almost immediately when Iranian President Mahmoud Ahmadinejad told the assembly most people believe the U.S. government was behind the attacks of Sept. 11, 2001, on the World Trade Center and the Pentagon.
That prompted a walkout by the U.S. and several European delegations, which have also walked out during past speeches by Ahmadinejad at the United Nations because of anti-American or anti-Israeli comments. [ID:nN23253251]
Obama devoted much of his somewhat subdued, roughly half-hour speech to the Israeli-Palestinian conflict.
The U.S.-brokered talks are in danger of collapsing almost before they have begun because of the Sept. 30 expiration of Israel's self-imposed, partial moratorium on new construction in Jewish settlements on the occupied West Bank.
Israel's refusal so far to maintain the freeze -- and the Palestinians' threat to walk out if it does not -- have imperiled the negotiations, which aim to resolve the main issues in the conflict within a year.
"We believe that the moratorium should be extended," Obama said. "We also believe that talks should press on until completed. ... Now is the time for this opportunity to be seized, so that it doesn't slip away."
While Obama said the world economy had pulled back from the brink of depression, he said before starting talks with Wen that both the United States and China "have more work to do" to ensure balanced, sustained economic growth.
GLOBAL MESSAGE
Obama delivered his global message from the U.N. podium at a time when Americans are fixated by the sluggish U.S. economy before Nov. 2 congressional elections, in which voters are expected to punish his Democrats and reward Republicans.
A U.S. official said the yuan currency issue occupied most of the two hours of Obama's meeting with Wen and that the Chinese premier "did reiterate the Chinese intention to ... continue with reform of their exchange rate mechanism."
Wen made no mention of the yuan dispute during his speech, in which he stressed China's focus on promoting employment and said 150 million of its citizens lived below the poverty line while swaths of its rural countryside were "backward."
"The Chinese people's livelihood has made significant improvement but we do not yet have a full-fledged social security system, and we are confronted with high employment pressure," Wen said. "China ... remains a developing country."
Obama, who brought the Israeli and Palestinian leaders together in Washington on Sept. 2 to restart direct talks after a 20-month hiatus, spelled out that Arab states must show Israel how much it has to gain from seeking peace. [ID:nN23141253]
He urged countries that back the Palestinians to follow through with political and financial support and said they "must stop trying to tear Israel down" and take "tangible steps" toward normalization with the Jewish state.
Israeli Prime Minister Benjamin Netanyahu, whose coalition government is dominated by pro-settler parties, has said he will not extend the construction moratorium but could limit the scope of further building in some settlements.
Israel's delegation was absent from the assembly hall, but a spokeswoman for the Israeli U.N. mission said it was due to the Jewish holiday of Sukkoth. "It's not a boycott," she said.
The African Union urged the United Nations to put genocide and war crimes charges against Sudan's leader on hold, warning they could destabilize Africa's biggest nation and endanger an upcoming referendum on southern independence. [ID:nN23159004]
Malawian President Bingu wa Mutharika called for a one-year deferral of the International Criminal Court case against President Omar Hassan al-Bashir, charged with crimes in Sudan's western Darfur region. (Additional reporting by Alister Bull and Lou Charbonneau at the United Nations and Allyn Fisher-Ilan in Jerusalem; Writing by Arshad Mohammed and Patrick Worsnip; Editing by Peter Cooney)
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