Mideast Peace Loses Momentum

Israel must halt construction of a West Bank security barrier and show movement on other issues if it wants a summit between the Palestinian and Israeli leaders, Palestinian Prime Minister Ahmed Qureia said.

Israeli Prime Minister Ariel Sharon said Monday he would not accept preconditions for a summit, and the dispute threatened hopes for a decisive effort to end three years of violence and jump-start long-stalled peace talks.

"If he wants to meet, we'll meet, if he doesn't, we won't," Sharon said, according to a participant in a closed-door meeting with members of his Likud party.

Momentum had seemed to be building in recent days toward a renewal of talks on implementing the U.S.-backed "road map" peace plan. Last week, the main Palestinian militant groups agreed to a meeting in Egypt in early December to discuss a cease-fire with Israel. But the latest comments by the two premiers indicated that it could take some time to resume talks.

In other developments, Palestinian leader Yasser Arafat questioned Israel's commitment to the road map, and the spiritual leader of Hamas threatened to resume attacks on Israeli civilians.

Sheik Ahmed Yassin said in a newspaper interview that Hamas, which has been responsible for dozens of deadly attacks in Israel over the past three years, is ready to consider a cease-fire but only if Israel reciprocates.

"As long as Palestinian civilians are the victims of Israeli attacks, Israeli civilians also will be victims," he told the German daily Die Welt.

Meanwhile, the European Union is imposing special trade tariffs on products made in Israeli settlements in the occupied territories, reports CBS News Correspondent Robert Berger.

The issue has long been a bone of contention between the EU and Israel. Israel enjoys a free trade agreement with the EU, but Europe will now impose tariffs on products made in the settlements, because the EU sees the settlements as illegal. Until now, products in the settlements bore the label "Made in Israel," but not any more. The EU is Israel's biggest trading partner, so Israel reluctantly complied.

Meanwhile, Jewish settler groups are working on a peace plan that would place Palestinians into self-administered "regional authorities," Jewish settler leader Adi Mintz told The Associated Press.

In an interview with AP on Monday, Qureia said Israel should stop all construction in Jewish settlements — a key road map requirement that Sharon has evaded — and end travel restrictions on Palestinians in the West Bank and Gaza. He also called on Israel to lift a siege on Palestinian leader Yasser Arafat and release Palestinian prisoners.

"If now Mr. Sharon says he's ready to discuss seriously (these) issues ... and declares that he's ready to take decisions that will satisfy both the Palestinian and Israeli sides, then I'll be ready to meet," he said. "I want a meeting that will end up with positive results."

However, Qureia gave no indication that he would be willing to dismantle militant groups, a requirement of the road map and a key U.S.-Israeli demand. He stuck to his previous position that the Palestinian Authority would enforce quiet after a truce is reached.

Arafat, who has been confined to the West Bank town of Ramallah for nearly two years, attended morning prayers early Tuesday to mark the Muslim feast of Eid al-Fitr.

"We say to our martyred heroes you are ... our example and our banner and hopefully we will follow you to Jerusalem," Arafat said.

Arafat said the Palestinians remain committed to the road map, and accused Israel of blocking the plan. "Unfortunately, the other side did not agree to the road map," he said.

Sharon has said that he is considering "unilateral steps" if peace talks fail. According to media reports, these steps might include dismantling some isolated Jewish settlements and Israel drawing its own border with the Palestinians.

The participant in the meeting said Sharon added that "if there is a cease-fire and the dismantling of the terrorist infrastructure, they (the Palestinians) will attain an independent state."

Reaction was mixed. Cabinet Minister Uzi Landau said that talk of unilateral evacuation of settlements "encourages terrorism." But deputy minister Yaakov Edri supported Sharon, saying that "after three years of bloodshed, in which we have proven to the Palestinians that they will gain nothing from terror, we can permit ourselves to take the initiative in diplomatic steps."

Meanwhile, Israeli settlers are planning their own "diplomatic plan," Mintz said. The plan will be based on three principles: Defeating what Mintz called Palestinian terrorism, and eliminating the Palestinian Authority; granting administrative autonomy to the Palestinians; and the development of regional authorities. Final details, including the possibility of Israeli citizenship for Palestinians, are still being worked out, Mintz said.

The plan falls far short of Palestinian demands and even concessions that Sharon is willing to make.

The Palestinians object to the security barrier, whose planned route cuts deep into the West Bank in several areas to incorporate Jewish settlements into the "Israeli" side. About a quarter of the planned 360-mile route has been completed. Israel says the barrier is needed to keep out suicide bombers; the Palestinians see it as a major land grab.

The United States is also increasing pressure on Sharon. After backing most of Israel's policies, President Bush last week harshly criticized the security barrier and Israeli restrictions against Palestinians.

According to Maariv Tuesday, Israel and the United States have agreed to deduct $250 million from American loan guarantees to Israel. The sum represents the cost of the separation barrier, the paper reported.