(Adds details, Welch quotes, background)

By Arshad Mohammed and Sue Pleming

WASHINGTON, Nov 20 (Reuters) - The United States announced on Tuesday it will host a Middle East peace conference on Nov. 27 in Annapolis, Maryland, which Washington hopes will launch formal negotiations to create a Palestinian state.

In addition to Israel and the Palestinians, the United States invited about 40 countries, including Arab states Syria and Saudi Arabia which have no relations with Israel, to the meeting at the U.S. Naval Academy, the State Department said.

The militant Islamic Hamas organization, which controls the Gaza Strip and is viewed by Washington as a terrorist organization, will be excluded from the conference.

The meeting, President George W. Bush's most intense effort to resolve the six-decade-old conflict, faces many obstacles. They include the political weakness of both Palestinian President Mahmoud Abbas, struggling to maintain control of the West Bank against the Hamas challenge, and Israeli Prime Minister Ehud Olmert.

"The Annapolis conference will signal broad international support for the Israeli and Palestinian leaders' courageous efforts, and will be a launching point for negotiations leading to the establishment of a Palestinian state," U.S. State Department spokesman Sean McCormack said.

It is unclear how far the conference will go in tackling the core issues -- borders, security, settlements, the status of Jerusalem and the fate of Palestinian refugees -- that have defeated previous efforts to end the conflict.

"This is but the beginning of a very, long road," former Secretary of State Madeleine Albright told Reuters. "I think the expectation (from the conference) should be pretty low."

Prior to the announcement, the Bush administration sought Saudi Arabia's support, seen as vital to getting Arabs to get behind U.S. peacemaking efforts. Bush personally called Saudi King Abdullah, White House spokesman Gordon Johndroe said.

Saudi Arabia's participation could help Abbas compromise while also helping Olmert sell any deal to Israelis by holding out the prospect of a wider peace with the Arab world.

U.S. Assistant Secretary of State David Welch said he hoped Arab states would come but the United States did not yet have formal acceptances. Olmert and Abbas received their invitations earlier; the rest were to be sent out on Tuesday night.

'HOPEFUL AND EXPECTANT' ON ARAB PARTICIPATION

"We are hopeful, and expectant, that Arab countries will participate because ... this is a serious effort," Welch told reporters. "We feel we have a critical mass now to move forward," he added without providing specifics.

Arab countries have long accused the Bush administration of neglecting the Israeli-Palestinian conflict.

U.S. officials hope the talks will eventually lead to a Palestinian state even though officials from the two sides and U.S. diplomats working with them have yet to produce even an agreement on roughly how such negotiations, the first in seven years, are likely to proceed following the conference.

U.S. officials said the two sides were making progress on a joint document they hope to present at Annapolis but it was unclear if this would provide details on the core issues.

Before the conference, Bush plans to hold separate, meetings with Olmert and Abbas at the White House on Monday and will make brief remarks at a State Department dinner that evening that will include all those invited to Annapolis.

The following day, he will host a three-way meeting with the two leaders at Annapolis and deliver a speech. There will next be three closed-door, 90-minute working sessions on international support, Palestinian economic development and institution building and comprehensive Middle East peace.

More than 100 officials are expected to attend, including representatives from the Group of Eight industrial countries, the United Nations, the European Union and Middle East envoy and former British prime minister Tony Blair.

Former U.S. ambassador to Israel and Syria, Edward Djerejian, said he was heartened that Syria had been invited.

"It is better to have them there and for them to think twice before they feel that they are being left out and try to sabotage what is happening," he said.

Djerejian said he hoped the Saudis would send a senior official and both Israel and the United States would be disappointed if they did not.

Most countries are expected to send their foreign ministers. A U.S. official said he expected Saudi Arabia to be there but it was unclear Riyadh would send its top diplomat. (Additional reporting by Wafa Amr in Ramallah) (Editing by Alan Elsner)

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