updated 10/24/2007 4:21:02 PM ET 2007-10-24T20:21:02

Secretary of State Condoleezza Rice said Wednesday that a "two-state solution" in the Middle East was in jeopardy and described a narrow window of opportunity to push Israel and the Palestinians toward peace.

In a House hearing interrupted by anti-war protesters, Rice said an upcoming peace conference in Annapolis, Md., is needed to give hope to moderate Palestinian forces. She blamed Iran for fanning flames in the region, including what she called "troubling" new support for Hamas militants.

"Our concern is growing that without a serious political prospect for the Palestinians that gives to moderate leaders a horizon that they can show to their people that indeed there is a two-state solution that is possible, we will lose the window for a two-state solution," Rice said.

Rice's testimony was punctuated by Iraq war protesters. As Rice entered the hearing room, one woman rushed toward her and waved her hands — painted blood red — in front of the secretary's face. The protester shouted that Rice was a "war criminal" and should be taken to The Hague, home of an international war crimes tribunal.

Rice was stoic and continued with her business as the protester was removed. Others were likewise escorted away at the behest of Rep. Tom Lantos, chairman of the House Foreign Affairs Committee.

Despite the protesters' effort to focus on the war, the Israeli-Palestinian conflict and Iran dominated the hearing. Lantos, D-Calif., asked whether the Bush administration was doing enough to pressure Egypt to crack down on Hamas sympathizers and whether Bush was calling for the peace conference to salvage his political legacy.

Rice dismissed suggestions that the conference was a political ploy.

"There are probably easier foreign policy tasks to take on than the Israeli-Palestinian conflict," she said. "The timing comes down to what it is we need to do to give moderate forces in the region a boost and to deal a blow to forces of extremism."

The conference has not been scheduled, but should occur by year's end, she said.

More financial aid to be requested
She said the administration will ask Congress for more money to support the Palestinian government. She did not disclose the amount.

Israel's prime minister, Ehud Olmert, told parliament that the conference would mark the beginning of the end of his country's conflict with the Palestinians.

"I don't know if the time of peace is yet ripe," Olmert said in Jerusalem. "But I know that it is my duty as the prime minister Israel to do everything in order to promote that time and at least try and bring it closer."

Rice orders review of Iraq contractors
On a separate issue, Rice said a State Department review found serious problems with the way private security guards operate in Iraq and that the U.S. may need to change its policies on contractors.

Rice said she and Defense Secretary Robert Gates have told their deputies to study the situation further. Rice already has ordered rule changes so Washington has more oversight of security contractors.

In discussing Iran, Rice said the administration shares Congress' goal of imposing tougher penalties. But, she said, a multilateral approach is necessary and she urged lawmakers to work with the administration.

Last month, the House passed, by a 397-16 vote, legislation aimed at blocking foreign investment in Iran, in particular its lucrative energy sector. The bill, sponsored by Lantos, would bar the president from waiving U.S. penalties.

She was asked whether the administration is considering a military strike in Iran and if Vice President Dick Cheney was leading the charge. The U.S., she said, is committed to diplomacy but will not rule out any option.

"Frankly, the international community has to get a lot tougher if it's going to get resolved diplomatically," she said. "The Iranians are not a state, I don't think, that will change their behavior just through talking to them."

The top U.S. diplomat also said Iran's ties to Hamas were disturbing. "To see Iranian actual penetration now of these more radical elements of the Palestinian terrorist groups is really quite troubling," she said.

On other issues, Rice:

  • said the Iraqis are taking steps to crack down on rebels of the Kurdistan Workers' Party who fighting the Turks. The U.S. has told Turkey that retaliatory attacks would have a "destabilizing effect," she said.
  • cited delicate relations with Turkey as she urged lawmakers against moving ahead with a nonbinding resolution that would label as genocide the killings of Armenians by Ottoman Turks a century ago. "This is something that was a horrible event, in the mass killings that took place, but at the time of the Ottoman Empire. These are not the Ottomans," she said of Turkey's current leaders.
  • said the U.S. embassy in Iraq will be completed within budget, at a cost of $592 million, and that construction delays were being addressed. She declined to estimate when it would be finished.

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