A statement is anticipated any day now to announce the commencement of direct Israeli-Palestinian talks. However, the news initially expected as early as Sunday has been put on ice as the parties continue to argue about the terms of reference.

DOMESTIC CONSIDERATION

The Jewish settlement issue is still on the way leading to the direct talks, as the Palestinians are reportedly insisting the statement stressing there be an Israeli settlement freeze in the West Bank and that a final deal be signed in two years.

Any linkage to the question of the settlements could prove extremely costly to Israeli Prime Minister Benjamin Netanyahu. His government is currently overseeing a building moratorium in the settlements but the 10-month period of that freeze will come to an end in September.

Netanyahu heads a hawkish coalition. While he has promised to be serious about reaching a peace deal that will see the creation of a Palestinian state, many of his cabinet colleagues view the matter very differently. This was made perfectly clear to the Israeli premier when his inner cabinet discussed the matter earlier this week. It is reported in the Hebrew press that four of the seven members of the panel favored a resumption of building on the Palestinian territory.

The Haaretz daily reported that two more-dovish ministers are calling for either a three-month extension to the freeze or permitting building work only in the largest settlements. It is widely assumed Israel will insist retaining after any peace deal.

It is precisely because of Netanyahu's domestic pressures that Palestinian President Mahmoud Abbas wants to receive guarantees before committing to any direct parley with Israel. For him the best-case scenario would be a formal Israeli commitment. Short of that, he would want the United States to make the guarantees.

While Washington takes the lead on the peace process, it is officially within the remit of the international peace Quartet. It is the Quartet -- Russia, the United Nations, European Union and the U.S. -- that will make any announcement on the commencement of direct talks.

The Palestinians want the wording of the Quartet's statement to match that of a similar document written in March. However, it is understood Washington is trying to alter the wording somewhat to placate Israel.

CLEAR DIFFERENCES

From the Israeli perspective there is a feeling that the Palestinians want to achieve as much as possible before entering talks, according to Mordechai Kedar of the Arabic studies department at Bar-Ilan University near Tel Aviv.

He thinks the Palestinians fear that once they are sitting around a table with their Israeli interlocutors they will not be able to make substantial gains regarding refugees, borders, settlements and Jerusalem, the so-called core issues.

"The Palestinians cannot countenance relinquishing on these issues nationally, emotionally or politically," Kedar said on Tuesday.

That is arguably why the Palestinians have spent the last few months making various suggestions for preconditions to talks. The one that may have provided the Palestinians with the most room for optimism was that the talks pick up where they left off almost two years ago when Ehud Olmert was Israel's prime minister.

It is understood that the chief Palestinian and Israeli negotiators at that time, Ahmed Qurei and Tzipi Livni respectively, had made significant progress on most of the key issues. They had perhaps gone farther than the Netanyahu government would be prepared to travel now. As a result Netanyahu flatly rejected continuing from the point the sides had reached in 2008.

Hillel Schenker, co-editor of the Palestine-Israel Journal, views the Palestinian and Israeli positions somewhat differently. He sees the Palestinians as having thus far given American envoy George Mitchell a detailed account of their demands and expectations. At the same time, he says, the Israelis have not been forthcoming.

However, despite the clear differences between the parties, Schenker believes the talks will begin imminently. The question he asks, as do all those concerned with the situation, is whether they will produce positive results.