A 10-month freeze on new construction in Israeli settlements in the occupied West Bank expires today, imperilling Middle East peace talks less than a month after their launch by US President Barack Obama.
Palestinian President Mahmoud Abbas has said repeatedly he will walk out of direct negotiations with Israel unless the partial halt to building remains in place. Palestinians view Israel's settlements as a formidable obstacle to statehood.
Obama has urged Israel to continue the freeze, but Prime Minister Benjamin Netanyahu, whose coalition is packed with pro-settler parties, has offered only to limit the scope of renewed building rather than order a moratorium extension.
Israeli and Palestinian officials met US diplomats in New York at the weekend to try to find a solution and to prevent the much-heralded negotiations, which began on Sept. 2, from falling at the first hurdle.
Israeli Defence Minister Ehud Barak, who held talks over the past several days in New York on the issue, said there was a better than even chance the peace negotiations would continue even without a moratorium.
"I think that the chance of achieving a mutually agreed understanding about (a) moratorium is 50-50. I think that the chances of having a peace process is much higher," he said in a BBC interview.
State Department spokesman P.J. Crowley said Washington was "doing everything we can to keep the parties in the direct talks". He said U.S. special envoy on the Middle East, George Mitchell, met Abbas for 30 minutes on Saturday.
The freeze expires at midnight (2200 GMT) but some of Netanyahu's allies, including members of his own Likud party, are planning to mark the end of the moratorium earlier, by holding a cornerstone-laying ceremony for new homes in the remote Revava settlement in the northern West Bank at sundown on today.
More than 430,000 Jews live in well over 100 settlements established across the West Bank and East Jerusalem on land that Israel captured from Jordan in a 1967 Middle East war.
The World Court deems settlements as illegal, although Israel disputes this.
Palestinians say they will make it impossible for them to create a viable state and the issue is one of the core problems standing in the way of any peace deal.
Abbas holds sway only in the West Bank, having lost control of the Gaza Strip in internal Palestinian fighting in 2007 to Hamas Islamists who oppose his peace efforts with Israel.
Israeli leaders have said many of the big settlement blocs will inevitably remain part of Israel and have suggested swapping land with the Palestinians to compensate for the lost territory.
Netanyahu says no other Israeli leader has been forced to suspend building work while entering peace negotiations and argues that the talks should continue without preconditions.
There were very low expectations attached to these latest efforts to end the decades-old conflict, but a failure to find a compromise over the freeze before even hitting core issues, such as the future of the settlements and the status of Palestinian refugees, could sink the peace process for years.
When US efforts to broker a deal at Camp David collapsed in 2000, Palestinians rose up in what became known as the Second Intifada, with more than 500 Israelis killed in 140 Palestinian suicide bomb attacks from 2000 to 2007. At least 4,000 Palestinians were killed by Israeli forces.
The Israeli military says failure this time around would probably not lead to a generalised uprising, but it is braced for an increase in violence after months of relative calm.