Pessimism grows after Clinton meets Arafat, Barak

JERUSALEM (Reuters) - Israel has no more room for maneuver over the key issue of Jerusalem at peace talks with the Palestinians and time is running out for a peace deal, an Israeli negotiator said on Thursday.

The comments by Gilad Sher, following U.S. President Bill Clinton's separate talks with the two sides' leaders at the U.N. Millennium Summit, highlighted growing pessimism about the chances of concluding a peace agreement soon.

The gloom was deepened by a Palestinian official who also said time was running out and by Israel's acting foreign minister, who said problems would remain even if there was a compromise over a key holy site in East Jerusalem.

"We cannot be more flexible in our stances regarding Jerusalem," Sher told Israel's army radio.

"So what is expected now is that in quiet back-channel contacts with (Palestinian President Yasser) Arafat and those close to him, logic will prevail." The White House said Clinton failed to break the impasse at separate meetings with Barak and Arafat on Wednesday but would keep trying to bridge the gap.

It announced no agreement for another summit to follow the 15-day meeting at Camp David in July, which failed to produce a deal to end 52 years of conflict between Israel and the Palestinians largely because of the dispute over Jerusalem.

Israel seized East Jerusalem in the 1967 Middle East war and annexed it in a move not recognized internationally. It regards all of Jerusalem as its capital but the Palestinians want East Jerusalem as the capital of a future independent state.

Muted reactions, time pressures

Reaction to Wednesday's talks at the United Nations was muted among Israeli and Palestinian officials.

Sher said there was still a chance of agreement but added: "There is a certain political clock...We have about three weeks or a month."

Nabil Abu Rdainah, an adviser to Arafat, told Voice of Palestine radio: "There is no time left."

Israel's acting foreign minister, Shlomo Ben-Ami, said even an agreement on control of the area of East Jerusalem known to Jews as Temple Mount and sacred to Moslems as al-Haram al-Sharif would not resolve all disputes.

"We shouldn't make the mistake of thinking that some symbolic compromise that Arafat agrees to on the Temple Mount solves the rest of the problems," he told Israel radio.

Barak is under time pressure because the Israeli parliament is widely expected to call another no-confidence vote in him when it convenes after its summer recess at the end of October. He survived no-confidence votes before and after Camp David.

The chances of a U.S.-brokered peace could recede when the U.S. Congress goes into recess in early October before the presidential election due on November 7.

Clinton and Israel are demanding more flexibility from Arafat, but the Palestinians blame Israel for the deadlock. Arafat told the U.N. summit he was still determined to create a Palestinian state with East Jerusalem as its capital.

Some Palestinian officials have said they could accept a decision not to declare a state straight after the September 13 deadline if progress between the sides looks possible.

A Palestinian leadership body will meet at the weekend to consider when to make the statehood declaration. Some foreign leaders have advised Arafat to postpone the declaration.

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