Israelis and Palestinians signal deal on settlements

JERUSALEM -- In the clearest sign that a deal may be emerging to keep the troubled U.S. Mideast peace push alive, a top Palestinian official said Thursday that his side would accept an American proposal for Israel to curtail settlement construction for two months.

Israel indicated it, too, was edging toward a compromise. The country's ambassador to Washington confirmed for the first time that the U.S. is offering "incentives" for Israel to extend a just-expired settlement slowdown.

The settlement issue has threatened to derail peace talks just a month after they were launched at the White House. The Palestinians have threatened to leave if Israel resumes settlement construction on lands claimed by the Palestinians for a future state.

An Arab League gathering this weekend is expected to recommend support today for whatever the Palestinians decide.

A resolution to call off the talks would be a critical setback, but diplomats are hoping for a more ambiguous statement that would leave room for compromise.

With the clock ticking, U.S. mediators have been frantically trying to broker a compromise that would salvage the negotiations.

Palestinian negotiator Nabil Shaath told The Associated Press Thursday that the Palestinians accepted a U.S. proposal for a 60-day extension to the Israel settlement slowdown, with the idea that final borders between Israel and a Palestinian state be negotiated during that time. If borders are set, Israel could then resume construction on all territories it expects to keep, while halting construction on Palestinian lands.

"We accepted a moratorium for two months on condition that by the end of this period we will reach an agreement on the issue of the borders," Shaath told The Associated Press, adding that if no agreement is reached, "then this moratorium should be extended."

In principle, the Palestinians demand a full halt to all settlement activity, saying that continued construction on lands they claim sends a message that Israel isn't serious about negotiating peace, but Shaath signaled they are prepared to accept the partial freeze Israel maintained for 10 months before its expiration.

Some 300,000 settlers already live in the West Bank, in addition to 180,000 Israelis living in Jewish neighborhoods in east Jerusalem. The Palestinians claim both areas, with east Jerusalem as their capital.

Netanyahu has said the settlement slowdown, which expired on Sept. 26, will not be extended. With his government dominated by pro-settler hard-liners, further moves against the settlers could result in a political crisis and possibly even fracture the coalition and bring down his government.

At the same time, he faces heavy pressure from the Americans to keep the negotiations afloat. In a videotaped interview posted on the Washington Post's website, Israel's ambassador to the U.S., Michael Oren, confirmed the U.S. has offered "incentives" for Israel to extend the settlement curbs.

He did not elaborate, but Israeli officials have said that a package of "assurances" are being sought, ranging from U.S. diplomatic support at the United Nations to new military aid to backing for key Israeli positions in the peace talks.

Oren said he expected a resolution within 48 hours, a timeline that roughly coincides with the Arab League meeting.

In Washington, State Department spokesman P.J. Crowley said the Americans were counting on the 22-member Arab League to grant "continued support" for the new negotiations. "We think that withdrawing support from the negotiations at this stage would be premature," he said.

After months of U.S. shuttle diplomacy, Obama personally launched peace talks -- the first in nearly two years -- at the White House on Sept. 2.

He hopes to broker an agreement within a year that will tackle all of the core issues in the Israeli-Palestinian conflict: final borders, the fate of millions of Palestinian refugees whose families were displaced during the creation of Israel in 1948, and resolving the conflicting claims to Jerusalem.

Before addressing those explosive issues, though, the impasse over Jewish settlements will have to resolved.

Netanyahu has been sounding out key Cabinet members in recent days on extending the settlement restrictions, which halted new housing starts while allowing pre-existing construction to continue. But he has run into stiff opposition from pro-settlement ministers.

In a move that appeared to be aimed at placating the hard-liners, Netanyahu said Thursday he would hold a Cabinet vote next week on a contentious citizenship bill.

The bill would amend a loyalty oath for non-Jewish immigrants applying for citizenship to describe Israel as "Jewish and democratic." While largely symbolic, the nationalistic language has angered the Palestinians and Israel's own Arab minority.

Among the main backers of the measure is Foreign Minister Avigdor Lieberman, who opposes extending the settlement slowdown. Cabinet approval of the declaration on Sunday might win a softening in his position on settlements. Allies of Lieberman, himself a West Bank settler, denied a deal was made.

Netanyahu said the measure is meant to underline Israel's insistence that in the negotiations, the Palestinians must recognize Israel as a Jewish state. "There is a very big struggle today to abolish, to blur, the state of Israel as the national homeland of the Jewish people," Netanyahu said Thursday during a visit to the central Israeli city of Lod.

The Palestinians refuse to declare Israel a Jewish state for two reasons: They feel it would undermine the status of Israeli Arabs and would undercut the claims of Palestinian refugees.

Ahmed Tibi, an Arab lawmaker in the Israeli parliament, called the proposal unacceptable.

"The international community should say no to this," he said. "The Arab states should ... demand from Israel that any agreement with Israel should include total equal rights for the Arab citizens of the state of Israel."