By Matt Spetalnick

SHARM EL-SHEIKH, Egypt, May 18 (Reuters) - U.S. President George W. Bush will try on Sunday to convince a sceptical Arab world that his outspoken support for Israel does not mean he is blind to the Palestinians' aspirations for statehood.

Wrapping up his Middle East tour in the Egyptian resort of Sharm el-Sheikh, Bush is looking to ease Palestinian dismay over his visit to Israel, where he lavished the Jewish state with praise, hailing it as a "homeland for the chosen people."

Bush assured Palestinian President Mahmoud Abbas on Saturday he remained "absolutely committed" to getting a peace deal, including agreement on Palestinian statehood, before he leaves office in January -- a deadline widely viewed as unrealistic.

Bush insisted that a state "would be an opportunity to end the suffering that takes place in the Palestinian territories."

Though he did not directly criticize Israel, he seemed to be alluding to the hardship that Palestinians face from Israeli roadblocks and barriers in the occupied West Bank, measures they call collective punishment but which Israel says are to defend it against militant attacks.

"It breaks my heart to see the vast potential of the Palestinian people really wasted," Bush told reporters with Abbas at his side.

Bush's more sympathetic language on the Palestinians' plight appeared aimed at countering Arab doubts, reinforced by his visit last week for Israel's 60th anniversary celebration, about his ability to act as an even-handed peace broker.

WARMUP FOR SPEECH

Bush's comments were a warmup for a speech he will deliver on Sunday at the World Economic Forum in Sharm el-Sheikh. "I'll make it clear that I believe we can get a state defined by the end of my presidency," he said.

Bush said in his weekly radio address he would also use the speech to urge Arab leaders to reject U.S. foes Iran and Syria, calling them "spoilers" who impede progress in the region.

For his part, Abbas did not mention Bush's speech to Israel's parliament on Thursday in which the U.S. leader pledged unflinching support for the Jewish state but made only one reference to Palestinians' dreams of a state of their own.

But other Palestinian officials and Arab leaders and commentators have responded with stinging criticism.

"He should have told the Israelis no one can be free at the expense of others," Palestinian negotiator Saeb Erekat said. "He missed this opportunity and we are disappointed."

Bush's Middle East tour, his second this year, follows a U.S.-hosted conference in Annapolis, Maryland, in November.

Since then, talks have bogged down over Israeli settlement expansion in the occupied West Bank and violence in and around the Gaza Strip, where Hamas cross-border rocket fire has triggered a tough Israeli military response.

Bush hopes to forge a foreign policy legacy beyond the unpopular war in Iraq. Critics say his effort is too little, too late and still lacks the full weight of U.S. diplomacy.

Peace moves have also been hindered by the weakness of its main players. Abbas governs only in the West Bank while Hamas controls Gaza. Israeli Prime Ehud Olmert faces a corruption scandal that could force his resignation and may derail the peace process altogether. (Additional reporting by Tabassum Zakaria in Sharm el-Sheikh and Wafa Amr in Ramallah) (Editing by Tim Pearce)

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