U.S. President Barack Obama warned world leaders at the United Nations Wednesday that creating a Palestinian state by decree -- instead of through negotiations with Israel -- is bound to fail.

Obama called on both Palestinians and Israelis to "see the world through the other's eyes," and to restart talks for a two-state agreement that both can live by, saying there are no "shortcuts" to peace and the United Nations can't do it for them.

Obama spoke Wednesday morning to the United Nations General Assembly in New York, where Palestinian leader Mahmoud Abbas has sidestepped stalled talks with Israel to launch a bid for state recognition.

French President Nicolas Sarkozy backed Obama's call for the Palestinians to drop their formal bid for statehood, and offered another diplomatic solution. He supported observer state status for Palestinians but not full UN membership, while peace talks are held with Israel.

The move would head off a Security Council vote and a veto, which Sarkozy said could set off another "cycle of violence in the Middle East."

The French president offered a one-year timetable for Israel and the Palestinians to hammer out a deal.

But a Palestinian senior aide did not see that as an option.

"We will not allow any political manoeuvring on this issue," he said of the statehood bid.

Palestinian President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu have each been furiously campaigning for support but have not negotiated with each other.

Obama in tough spot

In his wide-ranging speech Obama said "peace is hard work" that requires compromise and won't be achieved "through statements and resolutions at the UN," or "shortcuts" -- an apparent reference to Abbas' decision to circumvent talks with Israel and go directly to the United Nations.

Obama said he stands by his statement from a year ago that a two-state solution is the way forward.

"I believed then and I believe now that the Palestinian people deserve a state of their own, but what I also said was that a genuine peace can only be realized between the Israelis and the Palestinians themselves," Obama said.

The Palestinians' goal of an independent state has been delayed for too long, he added, emphasizing that America's commitment to Israel's security is "unshakable" and their relationship is "deep and enduring."

Obama went on to touch on a number of global issues, from economic uncertainty to drought in the Horn of Africa, the Arab Spring, the rights of gays and lesbians, democracy in Libya and proposed sanctions against Syria.

Obama, who has publicly favoured a two-state plan for the region, runs the risk of upsetting the Arab world and appearing to flip flop if he uses his veto-power to shut down the Palestinians' UN bid.

Nine votes on the 15-seat Security council are needed for the Palestinian statehood bid to pass, along with no veto from any of the five permanent members. The U.S. would certainly veto the bid if it were to pass.

Palestinians could also go to the general assembly to ask for the lesser status, which would pass easily.

Harlan Ullman, a senior advisor at the Atlantic Council, a non-partisan U.S. think tank, said Canada and the United States could be on the "wrong side of history" by voting against the Palestinian bid for statehood.

"I'm afraid the United States, and to some degree Canada, will be hurt politically by voting against this, and will be accused of hypocrisy given the Arab spring," he told CTV's Power Play on Wednesday.

Ullman said American influence will be weakened in the region and Arabic countries will establish more "anti-American policies" in a time when the United States is already facing a reduction in its power abroad.

But Israel, which remains one of America's closest allies, would be furious if Obama and the U.S. were to support the Palestinians.

Talks between Israel and the Palestinians have been frozen for about a year. The Palestinians want Israel to halt settlement construction and accept pre-1967 borders as a starting point for negotiations. Israel, however, rejects any preconditions for talks and wants the Palestinians to recognize its status as a Jewish state.

The Palestinians have strongly backed Abbas' push with massive rallies in the streets and Seemungal said it would be difficult for Obama to convince the leader to back down at this point.