The chief Palestinian peace negotiator on Wednesday cast serious doubt on U.S. President George W. Bush's goal of brokering an Israeli-Palestinian peace deal by the end of the year, saying it would take a "miracle" to wrap up an agreement.

In another sign of frustration with the pace of the talks, the Palestinians urged the European Union not to upgrade its ties with Israel unless Israel halts West Bank settlement expansion. The diplomatic campaign signaled a new Palestinian approach to what is emerging as one of the biggest points of friction in the negotiations.

Israel and the Palestinians resumed peace talks at a U.S.-hosted summit last November and set a year-end target for reaching an agreement.

The lead Palestinian negotiator, Ahmed Qureia, said Wednesday that it is increasingly unlikely the sides can meet their jointly stated goal.

Speaking at a meeting of the ruling Fatah movement, Qureia said negotiating teams are working on all the key issues at the heart of the 60-year conflict, including the final borders between Israel and a future Palestinian state, the fate of millions of Palestinian refugees and the final status of Jerusalem.

But "gaps still exist," Qureia said. "If we continue in negotiations progress can be made, but not final progress. I don't think that we can reach an agreement this year unless there is a miracle."

While the Palestinians have grown increasingly impatient with the pace of negotiations, Qureia's comments were the strongest doubts yet about the timeline.

Israeli officials have also raised their own questions, saying a framework agreement, as opposed to a final deal, is the most likely outcome of the talks. A growing corruption probe that threatens to topple Prime Minister Ehud Olmert has cast further doubts on peace prospects.

In a speech about the peace talks in Washington late Tuesday, Olmert said, "the time for both parties to make difficult decisions is soon approaching." Officials in Olmert's delegation declined further comment.

One of the key sticking points of the talks has been continued Israeli construction in West Bank settlements and east Jerusalem — areas claimed by the Palestinians.

Earlier this week, a meeting between Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas was overshadowed by the settlement issue.

Abbas complained about continued Israeli expansion — plans for hundreds more apartments in east Jerusalem were announced earlier this week — while Olmert said he was upset about a letter in which Palestinian Prime Minister Salam Fayyad asked the EU not to upgrade ties with Israel.

On Wednesday, Fayyad spoke about his new campaign publicly for the first time during a visit to the West Bank village of Bilin.

He said the international community should take a firm stand against what he said where Israeli violations of its international commitments.

Under the U.S.-backed "road map" peace plan, Israel is required to freeze settlement construction. Olmert has declared a partial freeze, but allowed construction to continue in areas that Israel wants to retain under a final peace deal.

"In this context came our call to the European Union not to respond positively to Israel's request to upgrade its relationship with the EU, unless Israel implements all its commitments, mainly freezing settlement activities," Fayyad said.

At his meeting with Abbas, Olmert expressed "grave concern" about the letters to the EU, saying they "were simply unproductive," according to his office.

Israel, which has strong trade relations with the EU, is trying to upgrade ties in a series of political and economic areas, including participation in EU political bodies and other international organizations.

Israel also is seeking membership in the 30-member OECD, which champions democracy and free market economy. Fayyad asked that Israel be kept out in light of Israel's policies toward the Palestinians.

Fayyad's letters marked a new approach to confronting Israel.

In the past, Palestinian leaders have repeatedly urged the international community to help, but to little avail. However, Fayyad's specific requests might win more of a hearing, especially among European nations, which are generally more sympathetic to the Palestinians than the U.S.

Fayyad, an economist by trade, served in the International Monetary Fund and the World Bank, and is perhaps more familiar with the workings of international organizations than other Palestinian leaders.

While conducting peace talks with Abbas' government, Israel regularly battles militants in Hamas-ruled Gaza.

On Wednesday, the Israeli army closed the crossing that ships fuel into Gaza after an errant rocket fired by militants wounded a Palestinian worker at the terminal. The attack prompted Israel to halt shipments of industrial fuel, cooking gas and diesel to the territory of 1.4 million Palestinians.

Israeli government spokesman David Baker said the attack showed militant groups' "total disregard for the well-being of the Palestinian people." Richard Miron, spokesman for the U.N. Mideast peace envoy's office, condemned the attack, and even Hamas criticized it.

"We reject targeting the fuel line which supplies Gaza and considers this act contrary to the national interest," Hamas officials said in a joint statement.

Israel has largely restricted movement across the border since Hamas seized control of Gaza last June, and has closed the fuel terminal following other attacks on Israeli-controlled crossings.

Israel says it will not carry out any peace deal with the Palestinians until Abbas regains control of Gaza. The Palestinians want an independent state to include the West Bank and Gaza — areas that lie on opposite sides of Israel.