Foreign Minister Avigdor Lieberman says in a classified document that despite the indirect talks with the Palestinian Authority, the PA is expected to conduct a diplomatic struggle against Israel abroad. Lieberman makes his case in the document handed out to the forum of seven senior ministers.

The report also states that the Palestinians will seek to use the so-called proximity talks to increase American pressure on Israel so the freeze on settlement construction will continue well beyond its September deadline.

However, the document notes that if confidence in Israel's intentions is restored, direct negotiations might be possible.

The report was distributed to the ministers on May 6 and was prepared at the Foreign Ministry's Center for Political Research by the head of the Palestinian affairs team. The department, the ministry's intelligence branch, is responsible for political assessments - first and foremost on the peace process.

One of the report's messages is that the main reason the Palestinians agreed to indirect talks is their wish to test the seriousness of Israel's intentions.

"The Palestinians are embarking on talks with no faith in their outcome, virtually with the expectation that they will fail," the report says.

Foreign Ministry analysts say the basic Palestinian positions on the core issues - borders, Jerusalem, security, refugees, water and settlements - have not changed since the days of past negotiators Ehud Barak, Tzipi Livni and Ehud Olmert.

"In our assessment, the Palestinians will not reveal any area of flexibility, especially not on issues of borders and territory exchanges, because in their view the Israeli government is not genuinely interested in carrying out effective negotiations," the report says.

The document also notes that the Palestinians agreed to hold the proximity talks to extend the freeze on settlement construction in the West Bank and possible also in East Jerusalem.

"The Palestinians believe that there has been a change in U.S. policy toward Israel and are trying to use the negotiations to keep up the U.S. pressure to continue the settlement freeze beyond September 2010," the report says.

It says the Palestinians agreed to indirect talks because they seek good relations with Washington. In this way, they might receive U.S. guarantees and be in a good position if the Obama administration puts forth its own peace plan.

The possibility is also raised that the Palestinians will turn to the United Nations Security Council to seek backing for a Palestinian state within the 1967 borders, with East Jerusalem as its capital. They would concentrate efforts on the United States so it does not veto the initiative.

According to the report, one area where the Palestinians are flexible is the timetable of the proximity talks. They would agree to extend it beyond the four-month limit, possibly moving to covert direct talks if sufficient trust were built, the report says.