US Middle East Peace Envoy George Mitchell arrived here late Thursday for talks with the Israeli and Palestinian leaders in an attempt to get the two to agree to terms for so-called proximity talks.

Mr. Mitchell's trip comes despite recent indications from President Barack Obama that his administration is losing patience with the two parties in the conflict.

Among the issues that stand between trying to bring the two sides together is Israeli building in East Jerusalem, which Israel sees as part and parcel of its united capital and Palestinians see as the capital of their future state. Obama asked Netanyahu a month ago to agree to a freeze in all building projects in East Jerusalem, but Netanyahu has not given a formal answer to that demand until now.

Several news outlets reported Thursday that Netanyahu had given the Obama administration a negative reply – saying that a freeze in Jerusalem was a non-starter – but Netanyahu's office denied that any such answer was given. A spokesman for Netanyahu, Mark Regev, says that the reports of such a reply to the Obama administration were "erroneous."

But in an interview with Israel's Channel Two aired on Thursday, Netanyahu said that he would not freeze building in Jerusalem. "Our policy in Jerusalem will not change. It's not just my policy, and it's been our policy since the Six Day War. There won't be a freeze in Jerusalem."

He said that further progress depended on the Palestinians. "Whether or not we advance in the peace process doesn't depend on us," Netanyahu said. "The Palestinians climbed up a tall tree…and they need to come down from it." Asked whether this was a time when, given other existential threats posed by countries such as Iran and Syria, Israel could afford to anger the US, he responded: "We need to stand by our own critical interests."

"Serious work is going ahead. We've been working very hard in an ongoing way with the Americans to try to find a way to the resumption of the talks, and ultimately we all want to see the start of the indirect talks," Regev says. Those negotiations, dubbed proximity talks, would be a "corridor" to direct talks, he adds.

Although recent comments by Obama were understood here as having conveyed a sense of despair over attempts at bringing the parties to the negotiating table, US officials say Washington is not pulling back from its role as a Middle East peace broker.

Moving forward?

"Senator Mitchell will continue to make trips out here as we make efforts to move the proximity talks forward," says Kurt Hoyer, a spokesman for the US Embassy in Tel Aviv. Mr. Hoyer said that Mitchell would meet on Friday with both Netanyahu and Palestinian President Mahmoud Abbas, and would conclude his visit on Sunday.

Also Thursday, one of Israel's largest papers, Ma'ariv, reported that the spiritual leader of the Shas party, Rabbi Ovadiah Yosef, believes that Israel can afford to suspend construction in Jerusalem if it would help preserve the US-Israel relationship. The influential rabbi's remarks, reportedly made in a conversation with Israeli President Shimon Peres, were considered significant because the Shas party is one of Netanyahu's key coalition partners, and Shas ministers in Netanyahu's cabinet have been the most insistent about continuing to build in East Jerusalem.

Despite that, Bar-Ilan University political analyst Shmuel Sandler says it is unlikely that Netanyahu will attempt to spend the political capital necessary to declare a freeze in Jerusalem. Beyond Shas, other heavyweights in his cabinet – such as Foreign Minster Avigdor Lieberman – also oppose a compromise on building in Jerusalem. Mr. Lieberman made his opinion clear in comments to diplomats earlier this week.

"If Netanyahu declares a freeze in Jerusalem, it's the end of him," says Prof. Sandler. "It was surprising, what Ovadiah Yosef said, but perhaps it comes from a motivation of not being seen as the one who's stopping Netanyahu from making a deal. Any way you look at it, Netanayahu is not in a comfortable position domestically.

I don't think he can do more than he's done: he's already declared a West Bank settlement freeze that expires in September. And that means time for Obama to get the sides to reach a deal is limited, because after September there will be US Congressional elections, and at that time, he won't be able to pressure Israel too much."