* Trump and Netanyahu to hold first White House talks
* Iran, Syria, Israel-Palestinian conflict on agenda
* Netanyahu looking for "reset" of relations after Obama
* Trump says he wants to do "ultimate deal" in Middle East
By Luke Baker
WASHINGTON, Feb 15 (Reuters) - President Donald Trump will host Israeli Prime Minister Benjamin Netanyahu at the White House on Wednesday, their first meeting since the inauguration and one that promises to shape the contours of Middle East policy for the years ahead.
On the agenda are some of the region's most volatile issues: the war in Syria, the Iran nuclear file and the Israeli-Palestinian conflict, including Israel's settlement-building on occupied land and whether a Palestinian state will ever emerge.
Netanyahu, under investigation at home over allegations of abuse of office, spent much of Tuesday huddled with senior advisers in Washington preparing for the talks. Officials said they wanted no gaps to emerge between U.S. and Israeli thinking during the scheduled two-hour Oval Office meeting.
Attention will also be paid to body language. While the two men have known each other since the 1980s, Trump has shown a tendency when meeting other leaders to throw them off balance with lengthy, domineering handshakes.
For Netanyahu, a conservative who has spent 11 years in power but never previously overlapped with a Republican president, the gathering is an opportunity to reset ties after a frequently combative relationship with Democrat Barack Obama.
Dennis Ross, an Iran specialist and a Middle East coordinator under President Bill Clinton, said both parties had a vested interest in a successful meeting.
"It's going to succeed in no small part because both President Trump and Prime Minister Netanyahu have a very big stake in wanting to demonstrate that whatever the problems were with the last administration, they are now gone," Ross said in a briefing organized by The Israel Project, an advocacy group. "And that in no small part they were attributable to the last administration, meaning to President Obama."
Social media exchanges suggested a budding bromance between Netanyahu and Trump, who has pledged to be the "best friend" Israel has ever had in the White House. But the U.S. president has more recently tempered his pro-Israel stance.
Trump, who has been in office less than four weeks and has already been immersed in problems including the forced resignation of his national security adviser, brings with him an unpredictability that Netanyahu's staff hope will not impinge on the discussions.
During the election campaign, Trump was relentlessly pro-Israel in his rhetoric, promising to move the U.S. embassy from Tel Aviv to Jerusalem, backing David Friedman, an ardent supporter of settlements, as his Israeli envoy and saying that he would not put pressure on Israel to negotiate with the Palestinians.
That tune, which was music to Netanyahu's ears and to the increasingly restive right-wing within his coalition, has since changed, making Wednesday's talks critical for clarity.
Trump appears to have put the embassy move on the backburner, at least for now, after warnings about the potential for regional unrest, including from Jordan's King Abdullah.
And rather than giving Israel free rein on settlements, the White House has said building new ones or expanding existing ones beyond their current borders would not be helpful to peace.
That would appear to leave Israel room to build within existing settlements without drawing U.S. condemnation, in what is the sort of gray area the talks are expected to touch on.
Friedman, who has yet to be confirmed as U.S. ambassador to Israel, will not be participating in Wednesday's talks.
For the Palestinians, and much of the rest of the world, settlements built on occupied land are illegal under international law. Israel disputes that, but faces increasing criticism over the policy from allies, especially after Netanyahu's announcement in the past three weeks of plans to build 6,000 new settler homes across the West Bank.
Even more freighted than settlements is the question of a two-state solution - the idea of Israel and Palestine living side-by-side and at peace - which has been the bedrock of U.S. diplomacy for the past two decades.
Netanyahu committed to the two-state goal in a speech in 2009 and has broadly reiterated the aim since. But given regional instability and long-running divisions in Palestinian politics, some Israeli officials argue that the time is not ripe for a Palestinian state to emerge.
Netanyahu has spoken of a "state minus," suggesting he could offer the Palestinians deep-seated autonomy and the trappings of statehood without full sovereignty. The Palestinians want an independent state in the West Bank and Gaza, with the capital in East Jerusalem, which Israel seized in the 1967 Middle East war.
Trump's position on the two-state solution remains unclear. He has said he wants to do the "ultimate deal" and has named his son-in-law, Jared Kushner, as a senior Middle East adviser.
Kushner has forged ties with Israel's ambassador to Washington, Ron Dermer, a Netanyahu confidant, and has met with Arab diplomats, according to people familiar with the matter.
Trump supports the goal of peace between the Israel and the Palestinians, even if it does not involve the two-state solution, a senior White House adviser told reporters late on Tuesday.
Failure by a U.S. president to explicitly back the two-state solution would upend decades of U.S. policy embraced by Republican and Democratic administrations. It has long been the bedrock U.S. position for resolving the long-running Israeli-Palestinian conflict and has been at the core of international peace efforts.
The Trump administration is tentatively exploring whether U.S. Sunni Arab allies – which have had growing behind-the-scenes contacts with Israel, mostly over their shared concerns about Shi'ite Iran - might cooperate in any future Israeli-Palestinian diplomacy, the sources said.
Any sign of a softening of U.S. support for eventual Palestinian statehood could anger the Muslim world.
Prospects for any serious new diplomatic initiative remain unclear. The last peace efforts collapsed in early 2014.
"As the president has made clear, his administration will work to achieve comprehensive agreement that would end the Israeli-Palestinian conflict so that Israelis and Palestinians can live in peace and security," White House spokesman Sean Spicer told reporters on Tuesday.
On Iran, there are expectations that Trump and Netanyahu will find common ground. Both have expressed deep reservations about the nuclear deal signed with Iran. But rather than tearing it up, they are expected to look for ways of reinforcing it and quickly adding sanctions for any transgressions. (Additional reporting by Matt Spetalnick and Steve Holland; Editing by Leslie Adler)
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