Faced with the failure of Israelis and Palestinians to meet an end of year deadline for a peace deal, Secretary of State Condoleezza Rice nonetheless insisted Friday that a final settlement of the dispute between the sides was attainable.

President George W Bush's vision of a Palestinian state living alongside Israel 'will not come in a single dramatic moment, but it will come,' she told a news conference in Ramallah.

Summing up the progress of the peace talks so far, Rice - who arrived in the region Thursday ahead of a Sunday meeting in Sharm el- Sheikh, Egypt - said the year-long Israeli-Palestinian peace negotiations had managed to close the gaps between the sides, even if there was no peace agreement yet.

'The distance to peace has narrowed, but peace has not been achieved,' she said.

She said the US would continue to play a role in the peace process even during the transition periods in Washington, as President Bush prepares to hand over to president-elect Barack Obama, and in Israel, where Prime Minister Ehud Olmert heads an interim government as the country heads to new elections early next year.

Palestinian President Mahmoud Abbas seized on her remarks to urge Obama to get involved in the Israeli-Palestinian negotiations as soon as possible.

'We hope that the new administration will begin immediately tackling the Middle East issue so we would not waste time,' he said.

Israeli Prime Minister Ehud Olmert, who called Obama on Thursday night to congratulate him on his election victory, also discussed with the president-elect the need to continue the peace process.

Abbas and Olmert pledged at the Annapolis peace summit one year ago to try and conclude a peace deal by the end of 2008.

But the talks, formally relaunched around the turn of the year, and held amid a virtual media blackout, have been bogged down, in no small part due to a lingering dispute over whether Jerusalem, a key deal-breaker, should be included in a treaty now, as the Palestinians want, or left to be resolved later, as the Israelis prefer.

Rice, en route to Tel Aviv Thursday, admitted the upcoming elections in Israel early next year were a 'constraint on the ability of any government' to reach a peace deal, and White House spokeswoman Dana Perino said the deadline was unlikely to be reached.

Sunday's briefing in Sharm el-Sheikh will be attended by the 'Quartet' of international peace sponsors, who will hear Israeli and Palestinian negotiators tell them what has been achieved in the talks since they were launched amid much fanfare at last year's high- profile summit.

According to the Israeli Ha'aretz daily, the Israelis and Palestinians will announce at the briefing that they are committed to continuing their negotiations even after Obama takes office on January 20.

It was unclear whether the Quartet - consisting of the United States, Russia, the United Nations and the European Union - would release a document outlining the progress achieved in the talks so far, and detailing what still needs to be settled.

Israeli Foreign Ministry spokesman Yigal Palmor said Thursday that the Israelis were not counting on the briefing ending with any kind of joint document summing up the state of the talks.