The U.S. will not be deterred by setbacks and will persevere until a Palestinian state is established alongside Israel, President Obama's Mideast envoy said Tuesday after meeting the Palestinian president.

Envoy George Mitchell presented ideas on how to move forward, said Saeb Erekat, an aide to Palestinian President Mahmoud Abbas. He would not elaborate.

Resuming direct Israeli-Palestinian talks anytime soon seems unlikely because of Washington's failure to persuade Israel to extend a curb on settlement building. Abbas has said he won't negotiate face-to-face as long as expanding Israeli settlements deepen control over West Bank lands the Palestinians want for their state.

Instead, the U.S. now plans to discuss the so-called core issues of the conflict, including the borders of a Palestinian state and security arrangements, separately with the two sides.

"As we expected, there had been many difficulties, obstacles and setbacks along the way," Mitchell told reporters after meeting with Abbas for nearly three hours at the Palestinian leader's West Bank headquarters. "We accept it, but we are determined to persevere in our efforts until we reach the successful conclusion that I think all want."

This, he said, should include a viable, independent Palestinian state and secure, defensible borders for Israel.

The U.N.'s Mideast envoy, Robert Serry, told the U.N. Security Council in New York that 2011 is going to be a critical year to reach an Israeli-Palestinian peace settlement and the international community must help the parties make very difficult decisions.

He said the credibility of the Mideast peace process and its sponsors including the Quartet of Mideast peacemakers — the U.S., the U.N., the European Union and Russia — "will be at stake."

Quartet envoys met with Mitchell on Friday before he left for the region and Serry said a meeting of Quartet leaders is expected to take place "soon in the new year."

Serry called Israel's refusal to agree to a new freeze on settlements "a serious setback" and said the United States now plans to engage the Israelis and Palestinians in indirect talks on all final status issues.

He said the U.S. intends to be "a proactive participant offering ideas and bridging proposals when appropriate."

At a meeting in Washington in September, the Israeli and Palestinian leaders set a goal of reaching the outline of a final peace settlement by September 2011. That goal was set when Israeli and Palestinian leaders came to Washington in September to resume negotiations — a process that quickly broke down over disagreement on Israeli settlement activity in the West Bank.

Serry said "the goal must be a two state solution based on an end to the 1967 occupation and a resolution of all core issues."

Later, Mitchell toured the West Bank's largest city, Hebron, meeting with Palestinian business people, visiting a local dairy and inspecting a cargo crossing between the West Bank and Israel.

Mitchell noted that West Bank companies face challenges distributing their goods, an apparent reference to Israeli restrictions on trade and movement in the West Bank, despite a recent easing.

On Monday, Mitchell had a lengthy meeting with Israeli Prime Minister Benjamin Netanyahu.

With the new U.S. emphasis on discussing core issues, Netanyahu is expected to come under growing pressure from Washington to reveal his positions, especially on borders. Until now, the Israeli leader has declined, saying he would only do so in direct talks.

The Palestinians have said they have presented detailed positions in the past. In a document presented to the Americans earlier this year, the Palestinians said they want a state in the West Bank, Gaza and east Jerusalem, territories captured by Israel in the 1967 Mideast War, but that they are willing to swap 1.9 percent of the land to enable Israel to keep some of the settlements.

Netanyahu's more moderate predecessor made a somewhat similar offer to the Palestinians in late 2008, asking to swap 6.5 percent of West Bank land for Israeli territory, but there was no agreement on it.