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The Palestinian Authority on Sunday criticized Prime Minister Benjamin Netanyahu's highly anticipated foreign policy speech, in which he called for immediate peace talks and endorsed the creation of Palestinian state without military capabilities.

(Click here for the full text of Netanyahu's speech.)

An aide to Palestinian President Mahmoud Abbas said that the speech "sabotages" regional peace efforts, due to Netanyahu's refusal to accept an influx of Palestinian refugees into Israel and his unwillingness to compromise on the status of Jerusalem.

"Netanyahu's remarks have sabotaged all initiatives, paralysed all efforts being made and challenges the Palestinian, Arab and American positions," said Nabil Abu Rudeinah.

He noted Netanyahu's demand that Jerusalem be the undivided capital of Israel and that Palestinian refugees not be allowed into Israel: "This will not lead to complete and just peace," Abu Rudeinah said. "His remarks are not enough and will not lead to a solution."

He described Netanyahu's setting of a condition of demilitarization as a condition for Israel agreeing to a Palestinian state as "detail".

"Our main demand is the end of the occupation and finding a fair solution for Palestinian refugees and halting settlements," Abu Rudeinah said. "Other details should be resolved in negotiations."

A senior Palestinian negotiator called on U.S. President Barack Obama to intervene to force Israel to abide by previous interim agreements that include freezing settlement activity in the West Bank. The alternative, he said, was violence.

"President Obama, the ball is in your court tonight," Erekat said. "You have the choice tonight. You can treat Netanyahu as a prime minister above the law and ... close off the path of peace tonight and set the whole region on the path of violence, chaos, extremism and bloodletting.

"The alternative is to make Netanyahu abide by the road map," he said, referring to a U.S.-sponsored document under which Israel agreed to freeze settlement activity and Palestinians agreed to rein in militants hostile to Israel.

"The peace process has been moving at the speed of a tortoise," negotiator Saeb Erekat said. "Tonight, Netanyahu has flipped it over on its back."

Erekat said that Netanyahu had "unilaterally ended the negotiations" and took the possibility of peace talks off the table.

"[Netanyahu] spoke about a Palestinian state, [but only] after he removed from it the issue of Jerusalem, placed the issue of refugees outside negotiations, placed security outside negotiations when he spoke about a demilitarized Palestinian state," he said.

Erekat also said that there was no chance of Palestinian ever approving Netanyahu's vision for their state."He will have to wait 1,000 years before he finds one Palestinian who will go along with him with this feeble state," said Erekat.

Erekat, one of the senior negotiators on Abbas's team, said Palestinians needed to overcome the differences that have seen Hamas Islamists opposed to both Abbas and to interim accords reached with Israel seize control of the Gaza Strip.

Hours before Netanyahu's address, Palestinian officials said that a "yes or no" decision faces the Israeli leader regarding Middle East peace.

"What's required from Mr Netanyahu is a yes or a no - two states, accept agreements signed and to stop settlement activities including natural growth," Erekat had said .

Palestinian President Mahmoud Abbas, himself at loggerheads with Hamas, has said talks with Israel cannot resume until Netanyahu halts settlement and accepts a two-state solution.

In the Gaza Strip, Hamas representatives vehemently rejected Netanyahu's address. "In his speech, he ... erased the Palestinian refugees' right of return," said senior Hamas leader Ismail Radwan, adding that the prime minister also did not "recognize Jerusalem as the capital of the independent Palestinian state."

Radwan rejected Netanyahu's demand that Palestinians recognize Israel's Jewish character.

"His speech is a slap in the face of all those who have opted for the choice of negotiations with Israel," he added. "What needs to be done immediately is to sever all ties with Israel."

The Hamas movement rejects a two-state solution to the conflict withIsrael and opposes negotiations with Israel.