Hamas and Fatah, the rival Palestinian factions locked in a bitter cold war for almost a year, agreed yesterday to open formal talks on reconciliation as part of a deal brokered by Yemen.

Ali Abdullah Saleh, the Yemeni President, persuaded the two sides to come together to discuss ways of returning to the power-sharing deal in place before last summer’s fighting.

The announcement came as Dick Cheney, the US Vice-President, visited the Fatah-led Government in the West Bank and said that the foundation of a Palestinian state was “long overdue”.

However, the two diplomatic tracks — an internal Palestinian reconciliation and a diplomatic push for progress in peace talks between Israel and the Palestinians — may not be mutually compatible. Israeli officials have given warning that if Hamas, branded a terrorist organisation by the West, rejoins a Palestinian unity government, it will have to freeze its negotiations.

The current Israeli-Palestinian initiative, which has been weakened by Israeli raids into Gaza, Hamas rocket attacks on Israel and a shooting in a Jerusalem religious school, was made possible only because Fatah expelled Hamas from the Government after its own forces were driven by the Islamists from the Gaza Strip last June.

Under yesterday’s so-called Sanaa Declaration, the Islamist and secular factions agreed to start direct talks on a framework agreement aimed at restoring the status quo that prevailed before the civil war that led to Hamas seizing outright power in Gaza.

While amounting to no more than an agreement to talk after months of mutual recriminations, the agreement may be a way for both sides to try to gain some leverage in the impasse.

Fatah, which had demanded that Hamas relinquish power in the Gaza Strip, may be able to exert pressure on Israel to throw its weight behind the stuttering peace talks, which have been further hampered by the Jewish state’s refusal to freeze all construction in settlements in the West Bank.

Israeli officials worry that if they cannot come up with a deal with Mahmoud Abbas, the Palestinian President, they may permanently lose a partner with whom to discuss a two-state solution. For Hamas a return to government would allow it to re-enter the political mainstream while maintaining its staunchly anti-Israeli stance.

An agreement could also pave the way for renewed elections in the Palestinian territories, which recent polls indicate could be a neck-and-neck race between the Iranian-backed Islamists and the US-supported secular regime.

Western diplomats hope that the promise of a peace deal and a Palestinian state will start to sway Palestinian public opinion back towards Fatah, despite its long record for corruption and lack of accountability, factors that cost it an election in 2006 and allowed Hamas to take office.

An Israeli official said there were doubts that anything would come of the talks for a long time with both sides wanting to be reinstated as the legitimate government of all the territories. He said: “Too much is at stake. Abu Mazen [President Abbas] is trying to keep the United States on his side, he’s trying to keep the Europeans and he’s trying to keep the $7.2 billion promised to him at the Paris donors’ conference. All this depends on continuing to talk with Israel.”

Mr Cheney said yesterday: “As President Bush has said, the establishment of a state of Palestine is long overdue and the Palestinian people deserve it” but “terror and rockets do not merely kill innocent civilians, they also kill the legitimate hopes and aspirations of the Palestinian people.”