Palestinian chief negotiator Saeb Erakat and Deputy Prime Minister Dan Meridor insisted their appearance at the International Peace Institute was neither an indirect nor a direct negotiation, but it did show the more than 100 UN ambassadors, academics, journalists and others in the room how wide the gap still is between the two sides.
Meridor said Israel wants to return to direct negotiations with the Palestinians and indicated talks accompanied by US special envoy George Mitchell were making progress.
"I do hope in the coming weeks negotiations will skip over this strange proximity talks into real talks," he said. "We need to talk to each other and make the tough decisions needed, and if this is done we'll see progress this coming year."
Meridor said, however, that if there is no full agreement on the outstanding issues of Jerusalem, refugees, final borders and security "we will not let the negotiation collapse."
"It should not be all or nothing. We all wish for all, but if we can't get it, we should be very cautious not to risk everything on that," he said.
Erakat responded, saying the Palestinians never objected to negotiations but are insisting on a stop to settlement construction, which he stressed was not a condition but a key requirement in the 2003 roadmap leading to the establishment of a Palestinian state that was presented by the US, UN, European Union and Russia.
"This government of Israel has a choice, settlements or peace," he said. "They can't have both."
Erakat accused Meridor and the Netanyahu government of refusing to answer key questions: Will Israel begin negotiations where they left off in December 2008, accept East Jerusalem as the capital of Palestine and accept the 1967 border as a baseline for a two-state solution?
"Israel has three options," Erakat said, a two-state solution, a single state including Jews and Palestinians, or what he called a continuation of Israel's "racism" and "apartheid system" in the West Bank where Arabs and Christians can't use roads reserved only for Israelis.
Erakat warned the Israelis that "if by the end of this year we do not have a two-state solution, you will sweat, you will sweat."
Later, he explained that the Palestinian Authority was founded to establish the institutions for a Palestinian state, "not to keep Israel as a source of authority forever." If Israel insists on maintaining control, he said, the Palestinian Authority "cannot stand – it's irrelevant," and he indicated it might be dissolved.
Meridor said the future of Palestinian refugees is the most crucial issue for Israel.
"It's more important than even the exact delineation of the border, which is a problem but we can agree on
this: It's more important even than the security arrangements that are very important," he said.
Meridor said Erakat's statement that the Palestinian Authority has no right to negotiate the right of return of the refugees – that the refugees themselves will have to make the choice and they have the right both to return and to compensation – raised major problems.
Any peace agreement that did not settle the refugee issue would mean "there is no end to the conflict."