|Clinton says both Israeli and Palestinian leaders "recognise time is not on either of their sides" [AFP]
Hillary Clinton, the US secretary of state, has urged both the Israelis and the Palestinians to find ways to clear the "hurdle" posed by a looming expiration of Jewish settlements.
Clinton arrived at the Red Sea resort of Sharm el-Sheikh on Tuesday morning, for the second round of direct talks between Binyamin Netanyahu, the Israeli prime minister, and Mahmoud Abbas, the Palestinian president.
On Monday, Clinton had repeated US President Barack Obama's call for Israel to extend the 10-month moratorium on illegal settlements that is due to expire at the end of this month.
"We believe that the moratorium should be extended," the top US diplomat told reporters on her way to Egypt.
"At the same time we recognise that an agreement that could be forged between the Israelis and the Palestinians on actions that would be taken by both sides that would enable the negotiations to continue is in the best interests of both sides," she said.
The Palestinians have warned that if the moratorium is not extended, the negotiations could come to a complete halt.
The current freeze has not prevented the Israeli government from approving new settlements in East Jerusalem.
"Choosing to continue with settlements in any form means destroying the negotiations," Saeb Erekat, chief Palestinian negotiator, said.
Erekat was speaking after Netanyahu said on Sunday that he would not extend a partial building freeze, though he indicated he would curb future construction.
Allies of Netanyahu, whose coalition is dominated by pro-settler parties, warn of a government collapse if he fails to resume expanding the illegal settlements in the occupied West Bank.
The issue is likely to dominate Tuesday's talks at the Red Sea Resort, with Hosni Mubarak, the Egyptian president, also on hand to try to find a solution.
Besides Egypt, Clinton is due for talks with both leaders in Jerusalem and the West Bank town of Ramallah.
Al Jazeera's Ayman Mohyeldin, reporting from Sharm el-Sheikh, said that the main issue remains to be settlements.
"It does not look promising, but what we could see emerge is some sort of compromise, similar to what happened the last time - the Israelis agreed to stop building new settlements, but continued with what they called 'natural growth' of existing illegal settlements."
"We understand that we face some immediate obstacles that we hope to resolve in the next couple of weeks," Philip Crowley, the US State Department spokesman, told reporters on the eve of the talks.
And Netanyahu, said Clinton, has made it clear that Israel faces severe security challenges as the Iranian-backed Hezbollah in Lebanon and Hamas in the Gaza Strip acquire more dangerous missiles and rockets.
As for Abbas, she said he has long called for a two-state solution but must prove to the Palestinian people he can achieve the goal through negotiations rather than armed resistance.
When Clinton brokered the launch of the direct negotiations on September 3 in Washington, both sides agreed that within a year, they will resolve the core issues of Israeli security, borders of a Palestinian state, the fate of Palestinian refugees and the status of Jerusalem.
The Palestinians want a state in the West Bank and Gaza, with East Jerusalem as its capital. Netanyahu has embraced a two-state solution, but has shown no sign on yielding on Jerusalem as the undivided capital of the Jewish state.