Jerusalem, Nov 23 (Xinhua) The Israeli defence establishment has urged the government to strike a peace deal with Syria, even at the cost of the strategic Golan Heights, the Ha'aretz daily reported Sunday.

'An agreement with Syria must be advanced, despite the heavy price Israel would have to pay,' defence officials were quoted as saying in a paper to be presented to the cabinet next month as part of the National Security Council's annual situation assessment.

The defence establishment believes that removing the northern neighbour from the conflict would lead to an agreement with Lebanon as well, thus significantly weakening the radical Iran-Syria-Hezbollah-Hamas line-up, according to the report.

The paper said Israel must engage the new US administration of Barack Obama, in the peace process with Syria.

Ha'aretz reported that outgoing US President George W. Bush has so far given a cold shoulder to the Israel-Syrian peace front.

Israel and Syria resumed their peace talks earlier this year under the auspices of the Turkish government.

Following four rounds of indirect negotiations, a fifth round, originally planned in early September, has been on hold due to Israel's political turmoil.

Yet Israeli officials have voiced willingness to move the process forward into direct dialogues.

Israel should support moderate factions in Lebanon in its parliamentary elections scheduled for May next year, but not at the expense of Israel's interests, the defence paper said.

It stressed that Israel must strengthen its deterrence against Hezbollah and take 'low-profile' actions against Hezbollah's arms smuggling.

Turning to the whole Arab world, the paper proposes various steps to strengthen Israel's ties with moderate Sunni Arab countries, especially Saudi Arabia.

'Israel must examine ways to expand its dialogue with Saudi Arabia on various shared interests,' said the paper, adding that it must also act to neutralize potential risks in Saudi Arabia, including its development of nuclear capability among others.

Golan Heights was seized by Israel from Syria in the 1967 Six Day War and annexed in 1981, a move not recognized by the international community.