Netanyahu, Abbas, Obama AP 2009.
Benjamin Netanyahu, Barack Obama and Palestinian President Mahmoud Abbas before a meeting in New York in 2009. Photo by AP
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Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas will meet in Sharm el-Sheikh Tuesday morning under the shadow of a Palestinian threat to walk away from the direct peace negotiations if Israel ends its construction freeze in the settlements.

The two leaders will discuss whether to open the talks with a debate on security arrangements or drafting the Palestinian state's borders with Israel. U.S. Secretary of State Hillary Clinton and Middle East envoy George Mitchell, who will attend the meeting, will have the last word on this issue.

A senior Palestinian official in Sharm el-Sheikh told Haaretz that Abbas and Netanyahu had reached an agreement on the issues they are to discuss. But the main controversy remains the construction freeze in the settlements. PA spokespeople reiterated yesterday that if Israel resumes construction, even if only in the settlement blocs, the Palestinian delegation will quit the talks.

The talks will continue in Jerusalem on Wednesday. Abbas is scheduled to arrive in the capital to meet with Netanyahu - for the first time since the latter entered office. The meeting will probably take place in the Prime Minister's Residence, where former premier Ehud Olmert used to host the Palestinian president. Clinton and Mitchell will also attend.

Netanyahu convened the forum of seven seven ministers Monday to discuss his proposal to resume construction in the West Bank settlements after September 30. He proposed limited construction, mainly in the large settlement blocs and Jewish neighborhoods in East Jerusalem.

The ministers reached no decisions at the meeting, which lasted more than three hours. Most of the ministers did not reject Netanyahu's proposal out of hand. The only one demanding that construction be renewed with no restrictions and in all West Bank settlements was Minister without Portfolio Benny Begin.

Senior ministers Ehud Barak and Dan Meridor were in favor of limiting construction to settlement blocs only. Interior Minister Eli Yishai of Shas is also expected to support Netanyahu's proposal. Yishai is more concerned about construction in the ultra-Orthodox West Bank cities Modi'in Ilit and Beitar Ilit, home to many of his constituents.

Foreign Minister Avigdor Lieberman has said in recent weeks that unlimited construction should be renewed in the settlement blocs, with construction for "natural growth" renewed in isolated settlements.

A senior Jerusalem official familiar with the forum's debates said all the ministers know it is unrealistic to expect the resumption of unlimited construction. They are aware they must find a formula "the world can live with," the official said.

The Americans and Palestinians would find Netanyahu's proposal unacceptable, but the ministers are looking for a formula that would not sabotage the direct talks, the official said.

The Palestinian delegation landed in Cairo yesterday ahead of today's talks. Both sides decided not to hold a news conference after the summit. Instead, Egyptian Foreign Minister Ahmed Aboul Gheit will make a statement and sum up the meeting.

Palestinian source said the Americans were pressing the Palestinians to continue the negotiations at least until the end of September, to try to reach an understanding on borders and let Israel continue building in the areas it will keep under its sovereignty.

The Egyptian foreign minister said yesterday there was no problem with Israel's demand to recognize it as a Jewish state, but the United Nations must be the one to do so.

Netanyahu's hints in the last few days on limiting construction in the West Bank are raising concerns on the right. The settlers and Likud hawks are pleased with the pressure they have put on the prime minister, which has created the impression he has no choice but to continue construction.

They insist that construction continue not only in settlement blocs and cities but in all West Bank settlements.