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Secretary of State Colin Powell said on Monday he did not expect the Israeli government to respond to U.S. pressure on West Bank settlements until the Palestinian Authority cracks down on militants.

In an interview with the Charlie Rose Show, Powell sympathized with Israeli Prime Minister Ariel Sharon on the settlement question, saying it would be almost impossible for an Israeli leader to appear to be yielding to U.S. pressure.

Critics of U.S. and Israeli policy say that, on the contrary, Israel should stop work on settlements in the West Bank now because they do not contribute to Israeli security and antagonize the Palestinians who live in the territories.

The international community considers the settlements illegal but Israel disputes this. The United States once said they were illegal but now calls them unhelpful.

Powell said: "They (the Israelis) will respond, in my judgment, when it can be demonstrated that the Palestinian side is doing something about the bombing, the terror.

"It is very difficult if not impossible for the prime minister of Israel or any other nation in the face of activity that seems to be tolerated by the governmental authorities on the other side ... to say to his people that he is yielding to pressure from the Americans or anyone else."

Israel and the United States had talks in Washington on Monday on the wall or fence that Israel has started to build through the West Bank to keep out Palestinian bombers.

The White House told Israel the fence ran counter to U.S. goals in the region and that steps should be taken to minimize its impact on the Palestinian people and the peace process.

The Bush administration is considering whether to penalize Israel over construction of the fence, which President Bush has called "a problem" because it would make it hard to develop a contiguous Palestinian state.

The United States could make deductions from a $9 billion package of U.S. loan guarantees approved earlier this year.

Powell said the United States was engaged in Middle East diplomacy but would have to wait and see what kind of government Palestinian politician Ahmed Qurie can form.

Unless it meets at least three conditions, including action against militants, then progress on the Middle East peace plan known as the road map will not be possible, he added.

"If it is a government that does not have political authority independent from the machinations of Yasser Arafat, and if all the security forces are not consolidated under the new prime minister and if that prime minister is not committed to ending terrorism ... then we are not going to be able to move forward on the road map," he said.

Washington refuses to deal with Palestinian President Yasser Arafat, saying he is not a "reliable partner."

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