TRANSCRIPT

GWEN IFILL: For more on what's holding these talks together so far, we turn to Ghaith Al-Omari, the advocacy director for the American Task Force on Palestine and a former adviser to President Abbas, and David Makovsky, senior fellow at the Washington Institute for Near East Policy and the co-author of "Myths, Illusions, and Peace."

Let's talk about myths, illusions and peace, Ghaith Al-Omari. What happened today? Why didn't the Palestinians walk away from the table, as they had promised they would if these settlements were not frozen?

GHAITH AL-OMARI, advocacy director, American Task Force on Palestine: Because they realize that the price of walking out from the talks is very high, is very high from a domestic strategic perspective.

Ultimately, they have no choice. And if you want to get a Palestinian state, the only way to get it is through negotiations. And they realize that. But, secondly, from a foreign policy perspective, they realize walking out right now would create isolation for the Palestinians. The Palestinians would lose the American president, would lose Europe. And so this is not an easy decision to make, and ultimately one that has to be done with examining all of the consequences.

GWEN IFILL: David Makovsky, so why didn't Israel, I don't know, just throw a little bit on the table and extend this freeze or this moratorium -- they don't like the word freeze -- for a few more months?

DAVID MAKOVSKY:, senior fellow, Washington Institute For Near East Policy: Well, I think Netanyahu has three sets of calculations. One is one of reciprocity. The other one is one of relevance. And the third one is one of consistency. He feels that, when George Mitchell put forward the idea in 2009, it would be as confidence-builders. Israel, you do some on settlements. Arab states, you take steps to normalizing Israel.

Now, maybe Mitchell didn't get 100 percent of what he wanted, because he wanted a full freeze, as you said, but maybe he got 95 percent of what he wanted. But the Arab states, I think, did zero percent in terms of moving towards Israel or even funding the Palestinian Authority properly.

So, that was -- so, there is a feeling of they're not -- there is no reciprocity here. Then there is also the issue of consistency. The Palestinians derided this moratorium because it wasn't a full-throated, 100 percent freeze. It didn't officially include East Jerusalem, even though, in practice, that actually there were restrictions on East Jerusalem.

And, basically, Netanyahu would say look, how could that which is inconsequential suddenly become indispensable? You know, we frittered away nine out of the 10 months because you said this wasn't sufficient. Now you are saying you need this to be extended.

The third issue is one of relevance, which is that these are all symptoms. And like Ghaith was saying, the idea here has to be the cure. Let's get to the core, let's cut to the chase already, and deal with the land dimension of this conflict.

And, if you do that, then there is no more issue of settlements because there is a border. If you are inside the border, you are not called a settlement. You are called Israel.

GWEN IFILL: I have to let Mr. Al-Omari respond to some of that, especially the part about whether the Palestinians were giving -- bringing anything to the table in this.

GHAITH AL-OMARI: No, I think, look, I mean, the Palestinians have been quite serious with the buildup to the negotiations, in terms of what they have done on the ground, in terms of security work, and now with the negotiations.

They do want to deal with what are the core issues. But, ultimately, there is this political obstacle of the settlement moratorium. I think what we are seeing right now, we're seeing an attempt to fine-tune a package, a package that will include a slowing down of settlements construction one way or another, that will include other things on the ground, in terms of allowing Palestinians further security jurisdiction, allowing for their economic development, removing some of the obstacles to movement.

But, ultimately, I think the Palestinians realize -- and, here, I would agree with David -- that, if we keep on getting stuck at every crisis that we see across -- that will come across the road, we will get nowhere. This is going to be a very difficult process. Let's jump straight to dealing with the endgame.

GWEN IFILL: So, let's assume for a moment that everyone has agreed, for domestic pressure reasons and international pressure reasons, that they're not going let this sticking point be the sticking point.

DAVID MAKOVSKY: Right.

GWEN IFILL: So has anything else been accomplished so far, any movement that you have heard about in these talks?

DAVID MAKOVSKY: Well, I think the key is that they focus first on security and borders, and that -- you know, to end this 40-year-old friction issue over the settlements, and because, basically, what the viewers of this -- of the NewsHour who have been following this story, but don't always keep up with all the fine details, they are saying, has there been any progress anywhere?

But the fact is, the last time around, the differences between the side over the land was only 4 percent. And each side knows what the other one wants in terms of borders and security.

GWEN IFILL: Well, so we should have an agreement tomorrow, right?

DAVID MAKOVSKY: Well, it just means to me that this -- there is actually something achievable. People -- no one has ever gone broke being cynical about the Middle East or selling the Middle East short. And there's a reason for that.

But, at the same time, what's lost in all the cynicism and skepticism is the fact that, on the issue of land, which people think is the be-all and end-all, the differences are narrow. And that is what gives the Obama administration, in my view, correctly so, a belief that, you know, this part is doable.

What might be harder to do are what I would call the narrative issues of this conflict, Jerusalem and refugees.

GWEN IFILL: Well, let's talk about that, Mr. Omari, because one of the things that's -- if it is true that -- if you agree that, in fact, 96 percent of this is clear and 4 percent of it still has to be worked out, who has the pressure, the power?

In the Israeli case, is it what the U.S. can bring to the table? And, in the Palestinians' case, is it what the Arab League can bring to the table?

GHAITH AL-OMARI: Oh, most certainly, most certainly. I mean, the Arab League has created the right kind of instrument for that, which is called the Arab peace initiative. They had offices in Beirut a few years ago and an Arab summit, which basically says, if there is peace between Palestinians and Israelis, if Israel reaches a deal with Syria, then Israel is not only getting peace with two countries; it is getting peace with all of the Arab world and all of the Muslim world.

So, this is the -- part of the package. Other parts of the package is, in each deal, there are going to be security currencies. And this is very important now, given what is happening in Iran, given what is happening beyond Iran.

So, what we seeing really is a full package. The Arab countries, unfortunately, have not yet done enough turning this from a grand offer, an all-or-nothing proposal, into a more operationalized one.

And this is, I think, what David was talking about. How do we get to a virtuous dynamic, where Israel does something, there is reciprocity, and vice versa, where one success builds upon the other? I think so far...

GWEN IFILL: We're not there yet.

GHAITH AL-OMARI: We're not quite there yet. Unfortunately, the first month, or since the launching of the talks, the oxygen has been sucked by this whole settlement moratorium. And that is why I will be very glad once this is out of the way, once we have resolved this one way or the another.

And let's see -- really start moving into the things that matter. As I think David has said and many have said before, once we reach a peace deal, all of these things in retrospect will look like details. Let's put this out of the way and let's get to what we know, as former negotiators and former officials, can be done.

GWEN IFILL: Is it out of the way, or is it just being pushed aside, and everyone is agreeing not to make this the breaking point?

DAVID MAKOVSKY: Well, I don't know. I would hope Ghaith is right. I'm concerned. You have an Arab League meeting coming this Monday.

GWEN IFILL: Right.

DAVID MAKOVSKY: And I think that, you know, the momentum is going to build during this week to make sure that the U.S. efforts behind the scenes -- and give Secretary of State Clinton and her team credit.

Whether it was in her trip to the Middle East or all week in New York, she was really trying to work something out here. And I think Defense Minister Barak of Israel stayed five extra days. Abbas was there. And now Blair, Middle East envoy...

GWEN IFILL: Tony Blair.

DAVID MAKOVSKY: ... Tony Blair and Barak and Netanyahu huddled -- this is a holiday week in Israel -- in Caesarea today to try to see. There is a U.S. paper now on the table. And the goal is to use these seven days to work this out, so this issue is diffused, so by the time the Arabs convene their Arab League meeting, this issue is off the table.

As Ghaith said, there is a historical interest here, because, in fact, when the Israelis got out of Gaza, they pulled out 8,000 settlers. And they got out of Egypt, they pulled the settlers out of the Sinai. So, when it came to war and peace issues, the parties ultimately do find a way. But right now, this obstacle is hanging out there.

GWEN IFILL: And how optimistic are you about getting past that obstacle?

GHAITH AL-OMARI: I'm very optimistic. I simply cannot imagine either side coming to the U.S. president, to President Obama, and saying, here, we're handing you a failure in this process one month into the process. It's unthinkable, inconceivable at the moment.

And, as I said, I believe that the strategic interests of both the Palestinians and the Israelis can only be fulfilled through a negotiated process. They might position and posture and do brinkmanship, but, ultimately, you know, there is no other option in the long term but to negotiate.

GWEN IFILL: Ghaith Al-Omari and David Makovsky, thank you both very much.

GHAITH AL-OMARI: Thank you.

DAVID MAKOVSKY: Thank you very much.