As representatives of the Mideast quartet tried again Monday to break the ice between Palestinians and Israelis, Israel's cabinet decided to maintain another freeze, that of Palestinian tax money.

Israel collects around $100 million of taxes and customs for the Palestinian Authority as part of the economic agreements signed in the 1990s. Every so often, Israel suspends transfer of this money; it currently is freezing funds in retaliation for the Palestinians' successful bid for membership in the United Nations cultural agency, UNESCO.

Israeli ministers are divided on the matter and the cabinet meeting ended with no decision.

According to press reports, Defense Minister Ehud Barak objects to withholding the money, a considerable chunk of the Palestinian Authority's budget that pays the salaries of Palestinian security personnel for the West Bank. Finance Minister Yuval Steinitz, however, strongly supports this as a punitive measure.

The issue arose as representatives of the quartet -- the U.S., Russia, European Union and United Nations -- met separately with Palestinian and Israeli negotiators, another round in attempts to reach a formula under which the two sides would agree to resume direct negotiations. Both sides have declared they accept the quartet's statement of Sept. 23, but they have yet to bridge a few fundamental sticking points to return to talks.

The Palestinians demand a freeze in Israeli settlement construction and acceptance of 1967 borders as the basis for talks. Israel, for its part, demands that there be no preconditions.
Sources close to Yitzhak Molcho, an Israeli attorney serving as a government envoy and negotiator, said Monday that Israel was disappointed that the Palestinians were dragging their feet and creating a false impression they were interested in direct talks. Chief Palestinian negotiator Saeb Erekat, for his part, said after the meetings that "Israeli settlements and the two-state solution are mutually exclusive."

They'll pick this up in December, the quartet said in a statement, urging the sides to resume direct talks without delay.

Meanwhile, at least there's hope in another kind of Israeli-Palestinian dispute. A radio spot running on Israel Radio in recent days is advertising that during the course of the next year, an Israel-Palestinian arbitration committee will start working and be available to settle business disputes between the two sides.

According to the ad, run by ICC Israel, the local affiliate of the International Chamber of Commerce, there is $5.4 billion worth of trade between the two sides every year. Arbitrated settlement of disputes will upgrade business, provide more jobs and enhance business stability for both sides, said the ad, narrated by the Israeli office's chairman, Oren Shachor, a retired general who once served as the coordinator of government activities in the Palestinian territories (a position now known by the acronym COGAT).