Palestinian President Mahmud Abbas. Picture: ABBAS MOMANI

Jerusalem -

Israel and the Palestinians were back to square one in the peace process on Friday after the Jewish state torpedoed US-sponsored talks in response to a Fatah-Hamas reconciliation deal.

Israeli Prime Minister Benjamin Netanyahu set the tone, telling the BBC that Palestinian president Mahmud Abbas could “have peace with Israel or a pact with Hamas (but) he can't have both”.

“As long as I'm prime minister of Israel, I will never negotiate with a Palestinian government that is backed by Hamas terrorists that are calling for our liquidation,” he added.

US President Barack Obama, whose administration dragged the two sides back to the negotiating table in July after a three-year hiatus, said Friday the Palestinian unity deal was “unhelpful”.

Speaking in Seoul, Obama acknowledged the need for a “pause” in the talks but vowed he would not give up on Secretary of State John Kerry's peace push despite the latest setbacks.

The two sides have been on a collision course since March when Israel refused to release a batch of Palestinian prisoners in line with the US-brokered agreement on resuming the talks.

The Palestinians retaliated by applying to join 15 international treaties and then Abbas, who heads the Palestinian Authority and Fatah, listed conditions for talks beyond an April 29 deadline.

Israel and the United States were hoping to extend the talks beyond the deadline as they have failed to achieve any concrete results so far.

Abbas said he would agree to an extension if Israel freezes settlement construction in the occupied West Bank and annexes east Jerusalem, frees the prisoners and begins discussions on the future borders of a promised Palestinian state.

Israel dismissed these conditions even as US envoy Martin Indyk was holding a new meeting with Palestinian and Israeli negotiators in another bid to find common ground.

At the same time, the Islamist Palestinian movement Hamas and the Fatah-led Palestine Liberation Organisation agreed to establish a “national consensus” government under Abbas within weeks.

The reconciliation deal infuriated Israel whose security cabinet said Thursday it would “not negotiate with a Palestinian government backed by Hamas” - its arch foe.

Analysts in the United States insisted that even if the Israeli-Palestinian talks hit rock bottom, the process was far from dead.

“Now is not the time to declare anything dead - now is the time to understand fundamentally why this didn't work,” said Aaron David Miller, a diplomat who worked for six secretaries of state on the process.

“It's never dead. It's like rock and roll, it will never die,” the Woodrow Wilson International Centre analyst told AFP.

Experts in Gaza added that Hamas, which refuses to recognise Israel and advocates an armed struggle against it, was “pragmatic” and has a keen economic and political interest in the reconciliation deal.

The Gaza Strip - ruled by Hamas while Abbas's writ is confined to the West Bank - has been besieged by Israel since 2006 and facing a dire humanitarian and economic situation.

Its only other border to the outside world is with Egypt which has outlawed Hamas and destroyed underground tunnels used to smuggle weapons but also many commodities such as fuel and construction material.

The destruction of the tunnels has generated losses estimated at $230 million (166 million euros) by the admission of the Hamas government, which is struggling to pay its civil servants.

“Hamas wants to escape Egyptian pressure. Reconciliation is its window to improve its regional and Arab relations, particularly with Egypt,” said Gaza-based political science professor Naji Sharab.

Hamas “is closer to political pragmatism in dealing with the negotiations” between Abbas and Israel, Sharab added.

An EU report in March on conditions in Gaza said a Palestinian reconciliation deal could help push forward peace talks.

Any peace agreement would go to a popular referendum, including in the Gaza Strip, which was an “integral” part of a future Palestinian state, the report said.

The PLO leadership is to convene at the weekend in the West Bank city of Ramallah for a key debate on the peace process and its options. - Sapa-AFP