Secretary of State Colin Powell reached out to the new Palestinian prime minister on Thursday, promising to work with Ahmed Qureia (search) but insisting he take immediate steps against terror groups.

Powell's telephone call to Qureia represented a measured vote of confidence that lagging Mideast peacekeeping might pick up again. Powell also called Palestinian Foreign Minister Nabil Shaath (search).

While Powell is disappointed that Palestinian security forces were not put under one command, he signaled his intention to work with Qureia despite the prime minister's ties to Yasser Arafat (search).

President Bush has ruled out dealing with Arafat, accusing the Palestinian leader of being involved in terrorism and corruption. But Qureia owes his appointment to Arafat, who continues to play a leading role in shaping policy on Israel, and the Bush administration intends to do business with him — provided he acts against anti-Israel terrorists.

A summit between Qureia and Israeli Prime Minister Ariel Sharon appears likely and administration officials are hoping for an end to both the stalemate in peacemaking and a three-year-old cycle of violence.

Powell congratulated Qureia on forming a new government and told the prime minister that "we are looking forward to working with him and his Cabinet," said a State Department spokesman, Adam Ereli.

At the same time, Ereli said, Powell "made the point that performance is what counts and that the Palestinian Cabinet needs to declare its firm opposition to terror and to take immediate steps against terrorist organizations."

Asked if Qureia had given Powell any assurances, Ereli replied: "Not that were reported to me."

The White House, meanwhile, renewed its criticism of the way Israel is constructing a security barrier in its effort to fence out Palestinians.

Bush has said Israel had a right to defend itself, but has appealed to Sharon to make sure the fence does not interfere with the lives of Palestinians on the West Bank or take over territory that might be part of the state he has promised the Palestinians in 2005.

On Thursday, Bush's national security adviser, Condoleezza Rice, said "the fence continues to be a problem."

"First of all, the president has made it pretty clear that his vision of the two-state solution would be one in which you didn't need a security fence," she told reporters at the White House.

The two primary U.S. concerns, she said, were the fence not amount to a "territorial outcome" and that "it infringe as little as possible on the lives of ordinary Palestinians."

Israel has made some adjustments to the route of the fence, Rice said. "Those are appreciated," she said.