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During an interview with Xinhua, Olmert said that, as past experience has proved, unilateralism could not solve the regional conflicts and bring about peace and security to Israel.

"I want to draw a distinction between substance and procedure. The substance is that I believe in the vision of two-state solution. There ought to be a Palestinian state that live alongside the state of Israel in peace and security for the Palestinians and for the Israelis. And in order to achieve this Israel will have to pull out from a large part of territories now administered by the state of Israel. And we are ready to do it," Olmert said.

In retrospect, Olmert admitted that the unilateral withdrawal didn't work as well as he had expected. "A year ago I believed that we may be able to do it on the unilateral basis. However it must be said that the experience we had in Lebanon and Gaza is not very encouraging. We pulled out from Lebanon on the unilateral basis and look what happened," he said.

A 34-day-long fighting between Israel and Lebanese Hezbollah guerillas erupted last summer, following the abduction of two Israeli soldiers by the Shiite group. It ended on Aug. 14 under a UN-brokered resolution. More than 110 Israeli soldiers and over 1,200 Lebanese were killed in the conflict.

"We pulled out entirely from Gaza and we returned back to the international border. And every single day they are shooting Qassam rockets on Israelis," Olmert said.

He stressed that under the present circumstances it will be more realistic to achieve the two-state solution through negotiations instead of a unilateral pullout.

Olmert, who replaced the ailing Arial Sharon on January 5, 2006and was sworn in as prime minister last May after a victory in the general election, has vowed to demarcate Israeli final borders by 2010 by evacuating isolated settlements in the West Bank while keeping the major ones with or without peace talks with the Palestinian side.