President George W. Bush said Wednesday night in his State of the Union speech that he would ask Congress for $350 million to support Palestinian political and economic reforms.

"The goal of two democratic states, Israel and Palestine, living side by side in peace is within reach," he said. He pledged that "America will help them achieve that goal."

Bush focused the second half of his speech on foreign policy, largely democratic reform in the Middle East.

To that end, Elliott Abrams, the president´s point man on the National Security Council for Middle East affairs, was promoted this week to deputy national security adviser, and will be the central figure at the White House overseeing reform efforts and also US policy toward the Arab-Israeli conflict. Abrams is regarded as a strong ally of Israel.

Bush pledged that America would "stand with the allies of freedom to support democratic movements in the Middle East and beyond, with the ultimate goal of ending tyranny in our world." He called on Egypt to "show the way toward democracy in the Middle East."

Bush, as he has in the past, told the Iranian people, hoping for an end to the clerical regime there, that America would stand with them in their search for freedom but he did not say how.

He urged Iran to abandon its uranium enrichment and plutonium reprocessing programs. France, Germany and the UK have been trying through diplomatic discussions to persuade Iran to do so but have failed to so far secure a meaningful pledge from Iran.

Bush accused Iran of being "the world´s primary state sponsor of terror." He said Washington is working with European allies to convince Iran to end its nuclear programs and stop supporting terror. Addressing the Iranian people, he said: "As you stand for your own liberty, America stands with you."

Bush sharply criticized Syria but threatened no fresh action, either economic or military, against Damascus.

"To promote peace in the broader Middle East, we must confront regimes that continue to harbor terrorists and pursue weapons of mass murder. Syria still allows its territory, parts of Lebanon, to be used by terrorists who seek to destroy every chance of peace in the region," Bush said.

Speaking to Congress, he added, "You have passed, and we are applying the Syrian Accountability Act, and we expect the Syrian government to end all support for terror and open the door to freedom."

Iran and Syria rejected Bush´s charges that they sponsored terrorism, with an Iranian official calling the claims groundless and the Syrian information minister saying the democracy America seeks for the Middle East could not come through force.

Iranian Foreign Ministry spokesman Hamid Reza Asefi, in remarks carried by the official news agency, said Bush´s words were "a repetition of his former groundless claims and accusations."

Syrian Information Minister Mehdi Dakhlallah said on Al-Jazeera Arab satellite television: "Everyone knows that Syria is cooperating in fighting terrorism, but the definition of terrorism cannot be selective and based on ideology and politics."

On Iraq, Bush said the US would "not set an artificial timetable for leaving Iraq, because that would embolden the terrorists and make them believe they can wait us out." He said in the new post-election phase there, "we will increasingly focus our efforts on helping prepare more capable Iraqi security forces – forces with skilled officers and an effective command structure." AP contributed to this report. (© 1995-2005, The Jerusalem Post 02/04/05)