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U.S. President Barack Obama may not help set up a Palestinian state if PA President Mahmoud Abbas does not enter direct negotiations with Israel soon, according to a Palestinian document obtained by the Associated Press.

The news agency reported yesterday that the document contained a warning to that effect from a senior U.S. envoy.

Palestinian Authority President Mahmoud Abbas has refused to engage in direct talks with Israel, citing the government's intransigence on settlements and the fate of Jerusalem and a lack of trust in Prime Minister Benjamin Netanyahu.

Netanyahu has repeatedly called for the resumption of direct talks.

An Arab League subcommittee on the Arab peace initiative is expected to support the Palestinian position of continued indirect negotiations with Israel, and not a move toward direct talks.

The peace initiative monitoring committee, which is to meet Thursday, is expected to demand the American administration issue a clear statement about the planned format of talks on a permanent-status arrangement, meaning a definition of the 1967 borders. They are also expected to call for a halt of all construction in West Bank settlements, including East Jerusalem.

Israeli officials say Abbas is rejecting the offer for direct talks for the simple reason that he does not believe Netanyahu.

An move by Abbas to enter direct negotiations without a complete freeze in the settlements, and without a commitment to resume from where they left off in Prime Minister Ehud Olmert's term, could be seen as a victory for Netanyahu, strengthening the prime minister at home and abroad.

The PA has asked the monitoring committee to recommend allowing the U.S. shuttle diplomacy between Ramallah and Jerusalem run its course until September and then consider the PA's future moves. The continuation of indirect talks until September would be seen as a small triumph for the PA.

The indirect talks, with U.S. envoy George Mitchell meeting separately with Abbas and Netanyahu, began in early May and were to last up to four months.

Officials in Ramallah say that if Netanyahu fails to renew the residential construction freeze in the West Bank, Israel's status in the world would sink to a new low.

To extend the freeze, Netanyahu would have to shake up his right-wing coalition, thus improving the chances of reaching an agreement with the PA.

Palestinian reluctance to enter direct talks is also the product of internal criticism within the PA. Palestinian concessions on the settlements would spark denunciations from Palestinian organizations, including the PLO.

Abbas fears that agreeing to direct negotiations, which they see as a trap, without getting anything in return would undermine his organization's standing and his own status.

They fear Netanyahu would extend the talks on the final status arrangement endlessly, to portray himself as a peace-seeker who will also not renounce his principles.

The Palestinians have repeatedly accused Netanyahu in the past weeks of preventing any discussion on the final status issues, especially those that were supposed to be addressed in the proximity talks - security and the borders.

The Palestinians say they have submitted a list of clarifications in writing to the American administration's 16 questions, while Israel has refrained from giving any answers.

This shows Netanyahu is not serious, they say.