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"The enemy's leaders call for a so-called Jewish state is a racist demand that is no different from calls by Italian Fascists and Hitler's Nazism," Mr Meshaal said.

Western aid for the reconstruction of Gaza after Israel's devastating offensive at the turn of the year is dependent on the outcome of the talks.

"No leader has the right to compromise on the right of return. We reject the permanent resettlement of Palestinian abroad, for instance in Jordan," he said.

Hamas has "no illusions about the new policy... we want change on the ground that will bring about an end to the occupation," he said.

n recent days Hamas officials have signalled that they may be ready to accept a Palestinian state limited to the territories seized in the 1967 Middle East war despite a commitment in the movement's charter to regaining the whole of historic Palestine.

"We reject the position taken by Netanyahu... on east Jerusalem, settlement activity, the right of return of Palestinian refugees and his vision of a demilitarised Palestinian state deprived of sovereignty over its land, air space and territorial waters," Meshaal said.

"We are opposed to Israel being a Jewish state ... because that would amount to the denial of the rights of the six million Palestinain refugees," Meshaal added, slamming the position of the new Israeli government as "fascist".

He said Hamas, which is mainly supported by Syria and Iran, sees no alternative but to continue armed struggle to liberate Palestinian land after decades of Israel flouting international resolutions to withdraw. "There is no alternative," Meshaal said. "Peaceful resistance works for a civil rights struggle, not in front of an occupation armed to the teeth."

"The minimum we accept is a Palestinian state with (East) Jerusalem as its capital, full sovereignty, removal of settlements and the refugees' right of return," he said.

"The state that Netanyahu talked about, with control on it by land, sea and air, is a freak entity and a big prison, not a country fit for a great people," Meshaal said in a speech in the Syrian capital to supporters of Hamas, which won Palestinian elections in 2006.

"We warn against any Arab leniency on this issue. The calls by the leaders of the enemy for the Jewishness of Israel are racist, not different to Italian Fascism and Hitler's Nazism," said Meshaal, who lives in exile in Syria.

He also called on Obama to pull out Lieutenant-General Keith Dayton, the US security co-ordinator in the region, who is supervising the training of Palestinian forces in the West Bank.

"The call by the Israeli leader for a Jewish state is nothing but a racist call, no different from Nazis and other calls denounced by the international community."

"Peaceful resistance works for a civil rights struggle, not in front of an occupation armed to the teeth."

"We appreciate Obama's new language towards Hamas. And it is the first step in the right direction towards a dialogue without conditions, and we welcome this," he said.

The findings of other intelligence agencies in the Middle East also indicate that Iran is sending weapons and explosives to Hezbollah in Lebanon and to the Palestinian radical group Hamas, which controls the Gaza Strip. The latest indication of this kind of support came with a failed attack on a shopping center in the Israeli port of Haifa on Sunday, March 22. Security forces managed to disable several dozen kilograms of explosives that had been loaded into a car parked outside the mall. Both Palestinian and Israeli experts who cooperated on the case believe that the attempted attack was the work of Iranian-backed Hezbollah.

Meanwhile, the Israelis have carried out aerial attacks in Sudan in an attempt to halt the delivery of weapons to Hamas -- including rockets with a range of 70 kilometers, far enough to reach Tel Aviv from the Gaza Strip. The Israeli Air Force bombed a convoy of 17 trucks travelling through the Sudanese desert which were attempting to deliver weapons to Gaza via Egypt. The two bombing raids in January and February killed more than 30 people, including Sudanese, Ethiopians and Eritreans. Last Thursday a Sudanese government official confirmed the attacks took place and on Friday the New York Times quoted unnamed US officials saying Israeli warplanes had attacked the convoy.

The level to which Iran is intervening politically in the region is made evident by the failure of attempts so far to achieve reconciliation between the rival Palestinian factions.

Sources close to the Egyptian mediation efforts say that an agreement between the two sides has been tentatively close on several occasions. There had even been a deal to release 450 Palestinian prisoners in Israeli jails in exchange for the Israeli soldier Gilad Shalit who is being held hostage by Hamas. However, even the veteran Egyptian mediators had underestimated Iran's influence.

Khaled Mashaal is regarded as Tehran's man in Hamas. The politburo chief lives in exile in Damascus but in recent months he has been frequently on the move, with Iran one of his most important destinations. Many Fatah officials, such as Ibrahim Abu al-Nasha from Gaza City who has known Mashaal for over 30 years, are convinced that the Hamas leader allowed the talks to fail under pressure from Tehran.