By Arshad Mohammed

ANNAPOLIS, Md., Nov 28 (Reuters) - U.S. President George W. Bush has set himself the herculean task of shepherding an Israeli-Palestinian peace deal by the end of next year, but doubts remain about his commitment.

As Bush proudly beamed behind them, Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas shook hands on Tuesday over an agreement to immediately begin their first formal peace negotiations in seven years.

Their goal is to craft a peace treaty by the end of 2008 -- just before the U.S. president leaves office -- but analysts remain skeptical the two politically weakened leaders can cut a deal and that Bush will seriously push them to do so.

"They have got enough time. The question is whether they have the will and the skill," Aaron David Miller, a scholar at the Woodrow Wilson Center think tank in Washington and a former U.S. peace mediator, said of the Bush administration.

"I am not persuaded yet that they have grasped the seriousness and the amount of work that is required to do what they say they want to do -- to reach an agreement on the core issues by the end of the Bush administration," he added.

Talks on those issues -- borders, settlements, the status of Jerusalem and the fate of Palestinian refugees -- are to begin Dec. 12 and any agreement would require compromises that will be painful for both sides.

Analysts question whether Olmert, who is unpopular among Israeli voters in part because of corruption investigations, and Abbas, who lost control of the Gaza Strip to the Islamist Hamas group in June, can deliver on any deal they might make.

"Neither has the support at home or the control of his government to do something extremely serious," said Jon Alterman of the CSIS think tank in Washington.

In part, skepticism about Bush's commitment is born of what critics consider his relative neglect of the issue for the first six years of his presidency.

"There is, I think, considerable doubt remaining about whether the administration is prepared to take on the heavy lifting ... to make this work," said Bruce Riedel, an analyst at the Brookings Institution.

In his speech at Annapolis, Saudi Foreign Minister Prince Saud al-Faisal raised some doubt about U.S. determination, noting Washington had committed to try to settle the conflict "within a specific time frame and we shall hold them to that."

However, Daniel Levy of the New America Foundation think tank said he saw some reasons for "very, very guarded optimism," including the fact that Bush demonstrated his interest in the issue simply by hosting the 44-nation meeting in Annapolis.

"This was an investment of presidential prestige that we hadn't seen before," he said.

Levy also praised the fact that the Israelis and Palestinians had agreed to work to resolve the final status issues and to try to improve the situation on the ground simultaneously as a step in the right direction.

"The key question is still the political will, the political courage on all sides," Levy said. "But you have a somewhat improved ... context in which you make those decisions of political will and political courage."

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