Hamas leader Meshaal acknowledges Israel exists

By Sean Maguire and Khaled Oweis

DAMASCUS (Reuters) - Hamas acknowledges the existence of Israel but formal recognition by the group will only be considered when a Palestinian state has been created, the movement's leader Khaled Meshaal said on Wednesday.

Softening a previous refusal to accept the Jewish state's existence, Meshaal said Israel was a "reality."

"There will remain a state called Israel, this is a matter of fact," Meshaal said in an interview in the Syrian capital, where he lives in exile.

"The problem is not that there is an entity called Israel," said Meshaal. "The problem is that the Palestinian state is non-existent."

Israel and Western governments have put financial sanctions on the Hamas-led Palestinian government for refusing to recognize Israel, renounce violence and accept past peace accords. The embargo has hit the Palestinian economy hard.

Meshaal said Hamas would defy the Western conditions and refuse to consider formal recognition of the Jewish state until a Palestinian state was established.

Changing the Hamas charter, which calls for the destruction of Israel, was also a matter for the future, he said.

"The distant future will have its own circumstances and positions could be determined then," he said in a wide-ranging interview.

Meshaal said Hamas backed Arab demands that a Palestinian state should include Gaza, the West Bank and east Jerusalem and that Israel should accept the right of Palestinian refugees to return to homes lost in a 1967 war and before.

"As a Palestinian today I speak of a Palestinian and Arab demand for a state on 1967 borders. It is true that in reality there will be an entity or state called Israel on the rest of Palestinian land," said Meshaal.

"This is a reality but I won't deal with it in terms of recognizing or admitting it," he added.

(Writing by Sean Maguire, Damascus newsroom)