No sign of settlement deal after U.S.-Israel talks

Israel's Prime Minister Benjamin Netanyahu (R) stands with U.S. Middle East envoy George Mitchell before their meeting in Jerusalem September 16, 2009.

JERUSALEM (Reuters) - The United States and Israel ended another round of talks on Wednesday with no sign yet of a deal on a West Bank settlement freeze, but a U.S. envoy planned to meet again with Prime Minister Benjamin Netanyahu on Friday.

The decision to extend discussions kept open the possibility of a meeting next week involving Netanyahu, U.S. President Barack Obama and Palestinian President Mahmoud Abbas, who all plan to attend a United Nations General Assembly meeting.

Failure to arrange at least an informal encounter between the Israeli and Palestinian leaders would be a setback for Obama, who has been trying to wring a settlement housing construction freeze from Netanyahu and restart peace talks.

Diplomats and officials in the Israeli and Palestinian camps said some form of trilateral meeting in New York seemed likely, and it might indeed signal a resumption of some form of "peace process" but not any resolution of key disputes.

"There'll probably be some kind of handshake because this is what Obama wants," one Israeli official said. "But it's not going anywhere longer term," he added, citing Abbas's internal opposition from Islamists and Netanyahu's pro-settler allies.

Obama's Middle East envoy, George Mitchell, who had held separate meetings with Netanyahu and Abbas on Tuesday, saw the Israeli leader again for two hours in Jerusalem on Wednesday.

A photo opportunity at the start of the meeting appeared to speak volumes. After a stiff handshake for the media, Netanyahu turned his back on Mitchell with scarcely a word and strode into his office, leaving Obama's envoy to follow behind.

Mitchell has been trying to work out a deal with a defiant Netanyahu, who has resisted Obama's call to halt settlement construction in the West Bank and Arab East Jerusalem, in the most serious rift in U.S.-Israeli relations in a decade.

In Washington, a State Department spokesman said after the meeting: "We did make some progress in getting to that goal of getting the parties to agree to relaunch negotiations, but clearly they need another round. The fact that they will meet and talk again I think is a good sign."

Netanyahu has said he would be prepared to limit temporarily the scope of building but projects under way would continue.

Obama also wants Arab nations to take steps toward recognizing Israel. They have so far expressed reluctance.

NO SUBSTANTIVE PROGRESS

A statement issued by Netanyahu's office after the meeting gave no indication any substantive progress was made: "The prime minister and Senator Mitchell had a good meeting this morning," the statement said.

"They decided to continue their discussions in a meeting that will take place this coming Friday, after Senator Mitchell returns to Israel from visits to countries in the region."

Mitchell was expected to hold talks in Cairo on Thursday. Jordan and Lebanon have also been on his planned schedule.

Abbas has made a resumption of peace negotiations with Israel, suspended since December, conditional on halting settlement activity as stipulated by a U.S.-backed 2003 peace "road map" charting a course toward Palestinian statehood.

But an aide to Abbas said he would find it hard to refuse a request from Obama to meet with Netanyahu, though under pressure from Fatah party allies who felt a gesture toward Israel without a halt to settlement would hand a victory to Islamist Hamas.

Some Palestinian officials have said he might agree to meet Netanyahu on the sidelines of the U.N. meeting that would not, however, be able to be characterized as formal negotiations.

Some 500,000 Israelis live in the West Bank and in Arab East Jerusalem, territory captured in a 1967 war, alongside some three million Palestinians. The World Court calls the settlements illegal and Palestinians say the enclaves could deny them a viable state.

(Additional reporting by Alastair Macdonald in Jerusalem, Mohammed Assadi in Ramallah, Andrew Quinn in Washington and Edmund Blair in Cairo)

(Editing by Alastair Macdonald)