Aug. 13 (Bloomberg) -- Syria seeks peace with the aim of regaining territory occupied by Israel since the 1967 Six-Day War and isn't isolated by U.S. sanctions, the country's deputy prime minister said.

``We believe a just and comprehensive peace is good for the prosperity of all people in the region,'' Abdallah Dardari said in an interview in Damascus yesterday.

Israel and Syria have held indirect discussions this year, mediated by Turkey, a first effort to reach a peace agreement since talks broke down in 2000 over the terms for Israel to return the Golan Heights. The strategic plateau covers about 1,250 square kilometers (500 square miles) and is home to about 18,000 Syrians, according to the Syrian government.

The Bush administration, which says the Syrian government is aiding militants in Iraq and destabilizing Lebanon, imposed economic sanctions in May 2004, including a ban on trade transactions with the Commercial Bank of Syria, the country's largest bank. Syria rejects the accusations.

``Sanctions have failed especially when they are unilateral,'' Dardari said, adding they hadn't dampened foreign direct investment.

``During this so called isolation we went to India, China, Malaysia, South Africa and Latin America,'' he said, referring to visits by Syrian President Bashar Al-Assad and other senior officials to strengthen economic ties. ``Yes there was pressure, but not isolation.''

Record Investment

Dardari said his country has lured record international investment, mostly from oil-rich Persian Gulf states which he estimates was $2 billion a year annually over the past 5 years. The funds from wealthy Arab states are compensating for a drop in oil production, helping push economic growth to about 6 percent this year, he said.

Tensions between the governments in Damascus and Jerusalem grew after Israel fought a 34-day war in Lebanon in 2006 against the Shiite group Hezbollah that is backed by Syria and Iran. Syria said Israeli warplanes crossed its northern border on Sept. 6 and were repelled by its air defenses after dropping ammunition on Syrian territory. Israeli officials have declined to comment on the incident.

President George W. Bush's administration has accused Syria of secretly building, with North Korea's help, a nuclear plant at the site that Israel bombed.

Syria has said the site housed only a military building and denied it was working with North Korea or any other nation on a nuclear program.

International pressure on Syria has eased since it helped broker an end to an 18-month political crisis in Lebanon in May. Syria played a key role in Lebanese politics for three decades and withdrew its army in 2005 after the assassination of Lebanese Prime Minister Rafiq Hariri.

A United Nations investigation into the killing implicated Syrian officials. Syria has denied any involvement in Hariri's death and other political killings in Lebanon.

To contact the reporter on this story: Massoud A. Derhally in Damascus at mderhally@bloomberg.net

Last Updated: August 13, 2008 03:35 EDT