Palestinians rule out any "deal without Jerusalem"

An Israeli Cabinet minister said Prime Minister Ehud Barakhad accepted a US proposal for shared rule in parts of Arab East Jerusalem, deferring the issue of who rules the walled Old City, but the Palestinians said there was no such official American document.

Barak and Palestinian President Yasser Arafat received encouragement from world leaders meeting at a G8 summit in Okinawa, Japan, who praised their courage after being briefed by President Bill Clinton.

"We welcome their courageous decision to continuenegotiations and confirm our support for their endeavours," the G8 leaders said. The White House announced that Clinton would hurry home from Japan early on Sunday to rejoin the talks.

Clinton told reporters he was "hopeful" about a peace accord. Italian Prime Minister Giuliano Amato quoted him as telling the G8 the consequences of failure would be "inexpressible."

The Palestinian source, making clear that Arafat was angered by Israeli accounts of the talks, said: "We have not agreed, and we will not agree, to delaying talks on Jerusalem . No official American paper on Jerusalem has been presented to us."

State Department spokesman Richard Boucher reported that Barak and Arafat dined on Thursday with Secretary of State Madeleine Albright, standing in for Clinton. It was the two men’s first meal together for several days.

The White House released a photograph of the three smiling together in contrast to the grim-faced pictures of recent days. But Boucher stressed: "It is a serious mood. It’s not jovial."

In another glint of detente, Boucher said some of the negotiators took time out on Friday evening to play basketball together. The sides were diplomatically mixed to avoid an Israel-Palestine clash, and most of the players were American.

US efforts to keep a lid of confidentiality on the talks suffered a setback on Friday when both sides went public with differing versions of American proposals on Jerusalem.

Cabinet minister Michael Melchior, who was part of Barak’s public relations team at the talks near Washington, confirmed in television interviews what Israeli officials had been saying privately during a virtual news blackout on the negotiations.

"We’re talking about a US proposal which accepts Israeli sovereignty over all of Jerusalem as an undivided city and has some signs of joint sovereignty, expanded self-administration, of some of the Arab Moslem quarters in the outskirts of Jerusalem," he told BBC World television.

He told Israel Radio that Barak had accepted the proposal.

Cabinet Secretary Yitzhak Herzog sought to distance Barakfrom Melchior’s comments after diplomats said US officials protested to the Israelis at a breach of the ground rules.

Palestinian spokeswoman Hanan Ashrawi urged caution andsaid Melchior was discussing matters that were not yet public, adding that the gaps between the sides were still wide.

The PLO representative in Washington, Hassan Abdel-Rahman,made clear in a statement to Reuters that his movement had moved on from its long-standing refusal to accept Israeli sovereignty anywhere in the city.

"Our position remains, and I affirm here, that we recogniseIsraeli full sovereignty over West Jerusalem in return for full Palestinian sovereignty over ast Jerusalem," he said.

Both Ashrawi and Abdel-Rahman described Israeli accounts ofthe U.S. Ideas as incomplete and self-serving.

An Israeli source in touch with Barak said Abdel-Rahman’scomments and the plans for Clinton’s early return on Sunday or Monday showed "there is progress behind the scenes."

Israel captured Arab East Jerusalem in the 1967 Middle Eastwar and annexed it in a move not recognised internationally. It has insisted that Jerusalem be its undivided capital, but Palestinians want East Jerusalem as their future capital.

REPORT OF U.S. PROPOSAL

Under the U.S. Proposal, Melchior said, Israel would annexsome West Bank Jewish settlements to Jerusalem, while Palestinian areas such as Shuafat could be jointly controlled.

He stressed that shared control would mean more than justself-administration of mundane tasks like garbage collection.

The U.S. Proposal would also freeze for several years thestatus quo in the walled Old City, home to key holy sites for Christians, Jews and Moslems, until a permanent solution could be negotiated, an Israeli official said.

Palestinians would have safe passage to the Old City’sAl-Aqsa Mosque complex, Islam’s third-holiest site. Melchior said discussions were under way for a sort of joint religious administration over holy sites.

Both Barak and Arafat have spoken to other Middle Eastleaders by telephone as they continue talks under the auspices of Albright in Clinton’s absence, State Department spokesman Richard Boucher told reporters.

Jordanian officials said King Abdullah spoke on Friday withBarak, Egyptian President Hosni Mubarak and Saudi Arabia’s Crown Prince Abdullah to safeguard Jordan’s interests in any final Israeli-Palestinian settlement and encourage the two sides to reach a deal.

Jordan, which ruled the West Bank and East Jerusalem from1948 to 1967, has renounced claims to the territory but is keen to ensure a fair settlement for Palestinian refugees, who make up more than 40 percent of its population.