Palestinian President Mahmoud Abbas declared on Thursday that Palestinians would not accept any alternative to Jerusalem as the capital of a future state, despite other proposals.

Abbas told Russian television that Jerusalem should not be divided and that there should be free passage for people of various faiths. The Palestinian leader added it must be made clear what belongs to the Palestinians and what belongs to Israel.

Abbas said that he could only recognize Israel as a Jewish state in the framework of a conclusive peace agreement that leads to the establishment of a Palestinian state.

Abbas also said that he could not agree to resume the stalled peace negotiations with Israel as long as construction in West Bank settlements and East Jerusalem continue. The peace process would collapse after the first meeting of such negotiations, said Abbas.

"If Israel says in the meeting that it will not accept the 1967 borders and that it is not prepared to discuss Jerusalem and the refugee situation, what is there to talk about?" Abbas said in the interview.

"If I enter negotiations with them and the building in East Jerusalem continues, Israel will be saying that Jerusalem is theirs. So why would I agree to negotiate while building in East Jerusalem continues?"

Israel has already turned down two initiatives formulated by the Palestinians, Egypt and Jordan to re-launch talks, Abbas said. Those proposals would have Israel agree to freeze all settlement building for at least a short period and recognize international resolutions. Also, the negotiations would be renewed from the point where they left off during the Ehud Olmert administration.

Abbas said that U.S. had asked Israel to make gestures to the Palestinians, including transferring additional territories in the West Bank to Palestinian control, halting Israeli military incursions, releasing prisoners, dismantling checkpoints and allowing building materials to enter the Gaza Strip.

According to Abbas, Israel said it would consider these gestures but had not yet responded.

Fayyad sees no agreement yet to resume Israel talks

Palestinian Prime Minister Salam Fayyad said on Thursday there was no agreement yet to resume talks with Israel, and Palestinians would have no faith in a process which failed to halt Israeli settlements.

A Palestinian official said this week President Mahmoud Abbas was studying a U.S. proposal for talks at a level below full-scale negotiations between leaders, which have been frozen for 13 months.

"We heard about low-level, mid-level, high-level (talks)," Fayyad told Reuters. "I don't think there is anything yet that has been crystallised in terms of going forward."

U.S. Middle East peace envoy George Mitchell has been trying to bring about a resumption of negotiations but Abbas has insisted first on a full halt to Israeli settlement construction in the occupied West Bank, including East Jerusalem.

He has rejected a 10-month, partial Israeli freeze, announced in November, as insufficient.

"We Palestinians stand to lose the most from a stalled peace process, but we would still like to see the process resumed in a way that would give us confidence that it can actually deliver what it should be able to deliver," Fayyad said on the sidelines of the World Economic Forum in Davos.

"I don't know when the process will be resumed."

He said Palestinians could not have any faith in peace talks if they failed to deliver "something as basic as requiring Israel to completely stop settlement activity".