Rivals Hamas and Fatah called off top-level talks Monday on forming a Palestinian unity government that might ease crippling international sanctions, the latest indication of difficulties in bridging their ideological differences.
With the Palestinians stuck, another channel for Mideast progress appeared to open when Israeli media reported that Prime Minister Ehud Olmert had a secret meeting with a senior official from Saudi Arabia. Both sides predictably denied the reports, as they have no official relations.
Palestinian President Mahmoud Abbas, the head of Fatah, postponed his planned trip to the Gaza Strip for talks with Prime Minister Ismail Haniyeh of Hamas, and both sides said no new date has been set.
Since a Hamas government took office last March, a cutoff of Western aid has brought the Palestinian Authority to its knees, leaving most public sector workers without pay for months and shutting down vital projects. Israel and the West insisted that Hamas must recognize Israel, renounce violence and accept previous peace accords, but the Islamic militant group has refused to comply.
Hamas trounced Abbas' Fatah in January parliamentary elections, a reflection of voter dissatisfaction with decades of inefficiency, corruption and high-handed rule rather than an endorsement of the Hamas ideology rejecting the existence of Israel.
Thrust into power for the first time, Hamas has refused to bend its main goal — an Islamic Middle East without a Jewish state. During the past decade, dozens of Hamas suicide bombers have killed hundreds of Israelis.
Fatah, under the late Yasser Arafat, recognized Israel and conducted several rounds of peace talks, resulting in some partial agreements. However, a full peace treaty eluded the two sides.
Bringing in Fatah now could provide a way to finesse the ideological impasse, entrusting negotiations with Israel to Abbas' PLO, in keeping with previous peace accords. Hamas would reserve judgment until a deal was reached.
Several times in the past months Hamas and Fatah appeared close to a political agreement based on the "prisoners' document," a plan put together by prominent Palestinians in Israeli prisons that calls for a Palestinian state in the West Bank and Gaza. Some believe that implicitly accepts Israel next door, without stating the recognition.
But the U.S., Europe and Israel have signaled this would not be enough — the new government itself would have to accept the three conditions they set for the resumption of aid — although Europe has softened its line recently.
Neither Hamas nor Fatah would give a reason for the latest delay or speculate about the next move.
Israeli media reported Monday that Olmert met a senior Saudi official. Saudi Arabia won praise from Olmert for its measured stance during the recent Israel-Hezbollah war, and it has revived a peace initiative based on pan-Arab acceptance of Israel in exchange for an Israeli withdrawal from all of the West Bank.
The Yediot Ahronot daily newspaper reported that Olmert and an unidentified top Saudi official met 10 days ago for talks that focused on Iran's disputed nuclear program and the need to achieve peace between Israel and the Palestinians, the newspaper said.
The Israeli daily Haaretz later reported that the meeting took place on Sept. 13, and Israel's Army Radio said the talks were held in the royal palace in Riyadh.
Olmert replied somewhat cryptically. "I did not meet with the Saudi king and I did not meet with anyone who should cause a media stir," Olmert told Yediot's Ynet Web site later Monday. "I didn't hold any meetings with anyone. All the rest is just imagination and speculation."
A Saudi official, speaking on condition of anonymity because he was not authorized to speak to the media, called the reports of a meeting "a figment of their imagination."
Separately, an Israeli military court ruled Monday that 21 Hamas legislators and Cabinet ministers would remain in Israeli custody, overruling a lower court. Israel rounded up dozens of Hamas officials after Hamas-linked militants captured an Israeli soldier in a cross-border raid from Gaza in late June.