COLLEGE PARK - Israel must dismantle its settlements in the West Bank and Gaza Strip and offer Palestinians a real chance of creating an independent state before peace can be reached in the Middle East, United Nations Secretary-General Kofi Annan said yesterday at the University of Maryland.

Annan gave the university's annual lecture in honor of slain Egyptian president Anwar Sadat shortly after learning that Saddam Hussein had agreed to the return of weapons inspectors to Iraq. But Annan did not address Iraq, focusing instead on the stalemate in the Middle East peace process.

Addressing an audience of 9,500 in Cole Field House, Annan said that Palestinians and Israelis shared responsibility for the failure to reach a peace settlement. He urged both sides to find leaders willing to follow the example of Sadat, who 25 years ago visited Jerusalem in an ultimately successful effort to create an Egyptian-Israeli peace treaty, a move Annan called an "act of breathtakingly radical daring."

"What is needed on both sides is true leadership, such as Sadat provided in his time," said Annan, the 2001 Nobel Peace Prize winner. "Let us pray they find it before it is too late."

Annan was especially critical of Israel, singling out what he called its "draconian security measures," its "unacceptable policy of assassinations of militants," and instances when Palestinian farmers have "been shot dead by extremist settlers intent on robbing them of their olive harvest."

"Israel piles precondition on precondition for a return to the negotiating table, and destroys the governing institutions of the Palestinian Authority even while calling for their reform," he said.

"Confined by roadblocks to their towns and villages, and much of the time by curfews in their own homes, the Palestinians watch hilltop after hilltop covered by new Israeli buildings, and valley after valley crisscrossed by roads reserved for Israeli settlers."

The speech was in line with Annan's past statements on the Middle East conflict, but apparently meant to give a renewed boost to what he described as a silent majority among Israelis and Palestinians in favor of creating an independent Palestinian state that would exist with Israel. Often, he said, the only people with any confidence in a solution are those who "believe their enemy can be defeated by force and violence."

But these strategies will never work, he said: Palestinians will never renounce their claim to statehood. And "no matter what price they are forced to pay, Israelis will not abandon the state they have built" - something the United Nations would never allow, he said.

To restore the hope of moderate majorities, Annan said, the United Nations, United States, European Union and Russia are preparing a "credible road map of synchronized steps" meant to lead to a two-state solution within three years.

The plan will require the Palestinians to realize that the Israelis need to feel fully accepted by their neighbors in order to renew negotiations. "Many Palestinians, seeing the devastation Israel is able to inflict on their society, find it hard to imagine that Israelis live in fear and that only by removing that fear can they hope to reach a new and more balanced relationship," he said. "Yet it is true."

As for the Israelis, they must do more to prove their willingness to accept Palestinians as neighbors - even if they feel they've done enough. "As long as the settlement building and land confiscation continue; as long as a political horizon is missing ... Palestinians will never be convinced of Israel's desire for peace," he said.

Annan's speech, particularly sections backing a Palestinian state, was met with applause. The crowd was smaller than the one that heard last year's Sadat lecturer, Nelson Mandela.