Hampered by huge budget deficits and an unpopular war, President George W. Bush on Tuesday called for Hamas to recognize Israel and disarm and declared that America must break its dependence on Mideast oil. "America is addicted to oil, which is often imported from unstable parts of the world," Bush said as he sought to drive the election-year agenda in his annual State of the Union address. Despite recent elections in Iraq, Lebanon and the Palestinian territories that have given rise to religious-based parties with views sometimes hostile to the West, Bush pressed Saudi Arabia and Egypt - longtime allies that Washington is loath to challenge too aggressively - to provide greater freedoms to their citizens. "Every step toward freedom in the world makes our country safer, and so we will act boldly in freedom's cause," Bush said. "Democracies in the Middle East will not look like our own because they will reflect the traditions of their own citizens. Yet liberty is the future of every nation in the Middle East." He urged Hamas to "recognize Israel, disarm, reject terrorism and work for lasting peace." He declared that the "the state of our union is strong" despite Americans' anxieties about the war in Iraq, the economy, and rising energy prices which throwing a cloud over the economy and pinching Americans' pocketbooks. The State of the Union speech is one of the prime events on the US political calendar. The nationally televised speech is delivered before members of Congress, Cabinet secretaries and other dignitaries. With the war in Iraq about to enter its fourth year and more than 2,240 American troops killed, Bush said the nation must not falter in what he called the central front in the war on terror. Bush did not offer any timetable for bringing American troops home from Iraq. There are about 138,000 U.S. troops in Iraq, down from about 160,000 at the time of the January elections. "There is no peace in retreat," the president said. "And there is no honor in retreat." Although the United States went to war on the faulty premise that Iraqi leader Saddam Hussein possessed weapons of mass destruction, Bush said, "Hindsight alone is not wisdom. And second-guessing is not a strategy." Bush said the United States and its allies were united in insisting that Iran not develop nuclear weapons. Speaking directly to the Iranian people, Bush looked toward a different future for their country and said the United States "hopes one day to be the closest of friends with a free and democratic Iran." Bush projected an air of optimism in a time of anxiety about the economy, the war and other problems. Virginia Gov. Timothy M. Kaine, delivering the response for the Democrats, scolded Bush on the soaring national debt, the frustrated effort to rebuild the hurricane-battered Gulf Coast, and other issues. On Iraq, Kaine said that Americans were given "inaccurate information about the reasons for invading" and that troops were given body armor that was inadequate. "The federal government should serve the American people," the newly elected governor said in excerpts released ahead of his speech. "But that mission is frustrated by this administration's poor choices and bad management. As he has in every State of the Union address to some extent, Bush said the United States must curb its reliance on foreign oil imports. He called for more research on batteries for hybrid and electric cars and work on alternative fuels to produce ethanol from wood chips, stalks or switch grass. "Our goal is to make this new kind of ethanol practical and competitive within six years," the president said. "Breakthroughs on this and other new technologies will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025. By targeting only Mideast oil, Bush was ignoring the largest sources of American petroleum consumption, Mexico and Canada. Imports of oil and refined product from the Gulf make up less than a fifth of all imports and 11 percent of total consumption, according to Energy Department statistics.