In the Qatari capital of Doha for a regional development conference, Clinton was asked why Arab countries should listen to her criticism when the U.S. can't even get its longtime ally, Israel, to make peace with the Palestinians.
"Israel is a sovereign country and it makes its own decisions," Clinton responded.
"I wish there were a way we could tell a lot of countries what they should do because there are a lot of countries doing things that are not in the best interests of their own people, their neighbors or the world," she added.
Clinton pointed out that Israel has reasons to be cautious. "You often make decisions based on your own experience and history," she said. "And when the Israelis pulled out of Lebanon they got Hezbollah and 40,000 rockets and when they pulled out of Gaza they got Hamas and 20,000 rockets."
Still, she said, the U.S. will continue to work toward achieving a separate state for the Palestinians.
"We have spent a lot of time and we will continue to spend a lot of time working to build enough confidence on both sides that they can make decisions that will by necessity mean compromises," the secretary said.
Earlier, Clinton called on Arab leaders to enact economic and political reforms. During questioning, she also called on them to join the U.S. in asking "what more can we do to help the Palestinian people continue their state-building efforts, which is a very positive development of the last several years."
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