A senior Palestinian source told Haaretz that the American administration renewed its pressure on Palestinian President Mahmoud Abbas to stay in direct negotiations with Israel, even if some construction in the settlements resumes after the end of the current moratorium. The source warned that Abbas would not be able to agree to a renewal of construction and will be forced to withdraw from the talks.

According to the source, a Palestinian okay to the renewal of construction just as direct talks are resumed is politically impossible. Sources in Ramallah said yesterday that both the Israelis and Americans know Abbas' likely course of action. At first, Abbas will demand that the talks not last longer than a year, culminating with the establishment of a Palestinian state in the 1967 borders, and with Jerusalem as its capital.

Abbas would not be able to give up Palestinian sovereignty in East Jerusalem and especially the Temple Mount, but large Jewish neighborhoods would be retained by Israel. If this much is achieved, Abbas will be able to agree that the refugee issue will be resolved primarily within the borders of the new Palestinian state, with only a few tens of thousands receiving Israeli citizenship as a humanitarian gesture.

At the moment, the Palestinian Authority does not seem to be determined to demand Israel take historical responsibility for the refugee problem. In earlier negotiations, the PA traditionally insisted each refugee be allowed to choose from several choices of compensation, including financial renumeration and a return to Israel proper, subject to an agreed quota.

The PA would also agree to a presence of NATO, but not Israel Defense Forces troops, in the West Bank and the Jordan Valley, and would only agree to land swaps at a ratio of 1:1 in size and quality - in other words, it would not agree to swap fertile West Bank lands for Israeli deserts.

A key contention could arise around the future of the large settlement of Ariel. The PA does not believe it can agree to the city being annexed to Israel in a future agreement, since it is located near the middle of the West Bank, cutting into the territorial contiguity of a future state.

However, the PA might agree to allow some settlers to remain as Palestinian citizens, and realizes other settlement blocs - Gush Etzion, Maaleh Adumim and the Jewish neighborhoods around Jerusalem - will remain in Israeli hands in a future agreement.