The international diplomatic "quartet" on the Middle East the United States, Russia, European Union and United Nations have endorsed President Bush's call for Palestinian statehood within three years. However the four parties, after their New York meeting Tuesday, differed publicly on the U.S. insistence that Yasser Arafat be replaced as the Palestinian leader.

The meeting was designed to generate support for the Bush administration's vision for Middle East peace. And there was broad agreement on the need for reform on the Palestinian side and a political settlement of the Israeli-Palestinian conflict based on the key U.N. resolutions 242 and 338.

But the participants departed company on the question of Mr. Arafat, with Secretary Powell again making clear the U.S. view that his continued presence as the head of the Palestinian movement impedes the peace process, but with the other three parties stressing their intention to continue dealing with Mr. Arafat as long as he remains head of the Palestinian authority.

At a news conference that concluded the two-hour "quartet" meeting at a New York hotel, Mr. Powell cited Tuesday's terror attack against Israeli settlers in the West Bank as an example of the kind of activity that has marked Mr. Arafat's tenure and blocked efforts toward peace. "The leadership that they have enjoyed in recent years has not brought them any closer to a Palestinian state," he said. "And once again we saw this morning the effect of this kind of terrorist activity which takes the lives of innocent Israeli citizens, and at the same time damages, if not destroys, the hopes of the Palestinian people to achieve a state of their own, and we once again condemn this kind of terrorist activity. So this is about finding a way forward, and not about personalities."

Direct U.S. dialogue with Mr. Arafat ceased after the president's June 24 Middle East message in which he made support for Palestinian statehood dependent on new leadership un-compromised by terror.

But in the session with reporters, U.N. Secretary General Kofi Annan, Russian Foreign Minister Igor Ivanov and Danish Foreign Minister Per Stig Moeller representing the EU all said they would continue dealing with Mr. Arafat. Mr. Ivanov said Moscow will not shun him as long as he remains head of the Palestinian Authority.

"It is only for the Palestinians to decide who they want to have as their leaders," he said. "It is the sovereign right of the Palestinian people. As for Chairman Arafat, he's the legitimately-elected leader of Palestine and while he's in this capacity, we'll continue to maintain our relations with him."

Mr. Powell and his colleagues also seemed to differ on priorities for restoring the peace process, with the secretary emphasizing the need to restore security over political and humanitarian concerns, while the U.N. secretary-general said without progress on all three tracks, settlement efforts will again fail.

In their statement, the four parties endorsed the drafting of a comprehensive action plan for Palestinian reform under auspices of the "quartet" including the restructuring of the Palestinian security apparatus leading to a state committed to combating terror.

They said Israel has a vital stake in the process and called on Prime Minister Ariel Sharon's government to take "concrete steps' to support it. These include the immediate easing of closures of Palestinian areas and the release of frozen tax revenues, and as security conditions permit, other steps including a withdrawal of Israeli forces to lines existing before September 2000.

Middle East consultations are to continue in Washington Thursday when President Bush hosts the foreign ministers of Egypt, Jordan and Saudi Arabia at the White House.