Kerry extends Mideast peace mission into third day

US Secretary of State John Kerry extended for a third day on Saturday his shuttle diplomacy between Israeli and Palestinian leaders, raising speculation of progress in reviving long dormant peace talks.

In a commute to which he has grown accustomed, Kerry took a helicopter from Jerusalem to Amman to see Palestinian president Mahmud Abbas and was to return in the evening to follow up with Israeli leaders.

Working hard," Kerry told a reporter who asked if he was making progress as he and Abbas sat down at the Palestinian leader's home in Amman for their second meeting in a many days.

In a potential sign of headway, Kerry cancelled a dinner he had scheduled for Saturday night in Abu Dhabi, part of his separate tour in the past week through Gulf Arab states to coordinate support for rebels in Syria's civil war.

State Department spokeswoman Marie Harf said that Kerry would still head to a meeting of Asian ministers in Brunei starting on Monday but called off the Abu Dhabi stop because his "meetings on the peace process remain ongoing".

US officials have said little on the closed-door discussions, saying that public comments would risk the fluid diplomacy.

Kerry was expected to speak before leaving the region but Israeli public radio said that his failure to hold an expected news conference in Amman pointed to continued stumbling blocks in the talks.

"(Israeli) diplomatic sources were still talking to me about the possibility of a four-way summit in Amman in the coming week," the radio's diplomatic analyst Chico Menashe reported.

"Now, with the cancellation of today's planned press conference, it appears that there is still nothing to announce."

Kerry has spent seven hours since Thursday sounding out Israeli Prime Minister Benjamin Netanyahu. Their two evening meetings took place at a hotel suite with sweeping views of Jerusalem named after slain Israeli peacemaker Yitzhak Rabin.

Kerry's aides have played down expectations of an imminent breakthrough and instead are hoping to make incremental progress to set the stage for substantive negotiations between Israel and the Palestinians.

The two sides have not formally met for peace talks since September 2010 and even then the negotiations broke down quickly, with Abbas saying that Israel was not serious about a discussion on the future.

The Palestinian Authority wants Israel to freeze construction of Jewish settlements on occupied land and to promise that any negotiations will be based on the principle of Israel withdrawing from land seized in the 1967 Six-Day War.

Netanyahu has rejected such "pre-conditions" but insists he remains ready to talk.

One idea floated is for Israel to agree not to announce new settlement construction but to make the commitment informally -- hence not putting at risk Netanyahu's increasingly right-wing governing coalition.

Economy Minister Naftali Bennett, who heads the far-right Jewish Home party, recently described the Palestinian issue as "shrapnel in the buttocks" -- a problem Israel simply had to keep suffering through -- but threatened to quit if the government agreed to a Palestinian state.

Abbas, whose rule is effectively confined to the West Bank, also faces Palestinian divisions.

Ismail Haniya, the Gaza-based prime minister of the rival Hamas movement, warned Abbas on Friday not to fall into the "trap of negotiations".

But Kerry heard encouraging words from Israeli President Shimon Peres over a two-hour dinner following the meeting with Netanyahu. Peres now holds a largely ceremonial role but was identified with the peace process while prime minister.

The nearly 90-year-old Peres, welcoming Kerry at his official residence full of memorabilia from the decades-old peace process, acknowledged that "it is difficult, there are many problems" in moving forward.

"But as far as I'm concerned I can see how (among) people, there is a clear majority for the peace process, a two-state solution, and a great expectation that you will do it and that you can do it," Peres told him.

In a sign of Kerry's desire to keep negotiating, he was paying a rare visit to Jerusalem during Shabbat, the weekly sabbath when observant Jews stop work and refrain from the use of electricity.

Kerry arrived just before sundown to see Peres, with aides warning that the two would have been obliged to cancel a photo opportunity after the sabbath began at around 7:15 pm (1615 GMT).

The secular-minded Peres, realising that they were cutting it close, quipped that the sabbath began at 7:30 pm in Tel Aviv and said: "Let's do a Tel Aviv Shabbat."