Israeli and Palestinian officials did not reach agreement Thursday during their fourth meeting in a week to find a way out of the current impasse in the talks, but sources familiar with their discussions said they did agree to continue meeting in the days ahead.
The source's comments came amid reports coming from Cairo, where Palestinian Authority President Mahmoud Abbas met with Arab League officials, that there was a breakthrough in the talks that would enable a continuation of the talks past the April 29 deadline.
One Israeli source familiar with the talks, however, denied any breakthrough, saying the sides were "still stuck, and not out of the crisis." He said the sides were, however, "continuing to talk to see if it is possible to find a way out."
In the meantime, a government official said that Israel decided to deduct from the some NIS 200 million in tax revenues it collects and transfers to the Palestinian Authority each month the funds the PA owes Israel, primarily for electricity and hospitals. In addition it was decided to stop Israel involvement in the development of the Gaza Marine gas field. The official said these moves were taken in response to the Palestinian's unilateral application to 15 international treaties and conventions.
Israel, one official said, was still mulling whether to also deduct from the sums transferred to the PA the amount of money the PA pays each year to terrorists serving time in Israeli prisons, and their families, as well as to the families of dead terrorists.
In Washington, meanwhile, State Department spokeswoman Jen Psaki, said that "both parties remain in intensive negotiations." She said the gaps were "narrowing," but that any speculation on an agreement was premature.
Psaki also said that US envoy Martin Indyk, in the center of efforts to reach an agreement, is going to return to Washington for consultation, and will come back to the region next week.
According to a Channel 2 report, the same package that was on the table last week was still on the table now, though in a somewhat modified form.
Under that package, scuttled when the Palestinians applied to join 15 international treaties and conventions, Israel would release the fourth batch of 26 Palestinian prisoners convicted of terrorist acts before the 1993 Oslo accords, hundreds of additional prisoners without "blood on their hands, and agree to "restrain" settlement construction in Judea and Samaria, in return for a Palestinian commitment to continue the talks until the end of January 2015, and to refrain from applying for admittance into additional international organizations, treaties and conventions.
In addition, the US would release Israeli spy Jonathan Pollard.
On Wednesday UN Secretary-General Ban Ki-moon began processing the Palestinian applications to 10 UN organizations and treaties, and the Swiss Foreign Ministry on Thursday accepted the Palestinian application to join the Fourth Geneva Convention.
One issue reportedly being discussed by the sides would be the status of these applications, and whether they would – or could -- be withdrawn. Foreign Minster Avigdor Libermn has said he would only support a deal if those applications were withdrawn. There is some speculation that if only some of the applicants are withdrawn, then Israeli will release a lower number of Palestinian prisoners "without blood on their hands" than initially intended.
Deputy Foreign Minister Ze'ev Elkin (Lkud Beytenu) came out squarely against a deal, calling on Prime Minister Binyamin Netanyahu to refrain from a package deal that includes a mass release of terrorists and a construction freeze, "certainly not until the Palestinians have withdrawn their applications to the UN."
Elkin said that returning to talks under these conditions would signal weakness, and reward the Palestinians for their recalcitrance. "We must not turn the other cheek when they spit in our face," he said.
Meanwhile, a senior PLO official on Thursday denied that Abbas had already agreed to the extension of the talks. Wasel Abu Yusef, member of the PLO Executive Committee, said that the PA leadership still hasn't met to discuss the possibility of extending the talks after April 29.
PA Foreign Minister Riad Malki said that the PA leadership has demanded the release of the fourth and final batch of Palestinian prisoners and a full cessation of settlement construction as a pre-condition for pursuing the talks with Israel.
Malki told the Voice of Palestine radio station that the PA leadership has also demanded that the two sides draw the borders of a future Palestinian state before agreeing to extend the negotiations.
Malki said that the Palestinians were now waiting for Israel's response to the demands.
He warned that Israeli failure to comply would prompt the Palestinians to consider additional steps following the decision to apply for membership in 15 international conventions.
Israeli officials countered that Israel would not agree to a construction freeze in Jerusalem, and that the Palestinian demand that the two sides first agree on borders is a "traditional Palestinian position" unacceptable to Israel.
No Israeli government would agree to discuss border without knowing what kind of state is on the other side of the border, he said, and whether or not it will be demilitarized, has given up all claims on Israel, and recognizes Israel as the nation state of the Jewish people.
"It would be like us saying first we must agree on the refugee issue, and then when they accept our position, we can continue talking about other things," he said. "You cannot talk about borders divorced from everything else."
As Israeli and Palestinian negotiations were meeting under Indyk's auspices in Jerusalem, Abbas met in Cairo with EU foreign policy head Catherin Ashton and called for an active EU role in the peace process.
Abbas briefed Ashton on the crisis in the negotiations. He blamed Israeli "intransigence" and settlement construction for the crisis.
Abbas also met in Cairo with former Egyptian Defense Minister Abdel Fattah Sisi and discussed with him the current crisis.
During a meeting on Wednesday night with Egyptian newspaper editors and journalists, Abbas accused Israel of foiling the peace talks by refusing to release the Palestinian prisoners at the end of last month.
Abbas was quoted as saying that Israel had demanded that one of the prisoners be deported from the West Bank after his release - a demand which, he added, was rejected by the PA leadership.
"We are totally opposed to deportation for moral and humanitarian reasons," he said. "It is internationally forbidden to deport someone from his homeland."
Israel has reportedly raised the idea of deporting to the West Bank or Gaza the 14 Israeli Arabs that the Palestinians are demanding Israel release as part of the final tranche of prisoners to be freed.