Egyptian Foreign Minister Ahmed Abul Gheit said Tuesday that Middle East peace talks could not be relaunched until Israel halts its settlement activity, which Tel Aviv said would continue in Jerusalem with 700 new housing units.
"The talks were very positive," Abul Gheit told reporters, after Israeli Prime Minister Benjamin Netanyahu and Egyptian President Hosni Mubarak met in Cairo.
"We have seen that the Israeli prime minister wants to move ahead (with negotiations), and he insists on moving ahead, but we insist on an agreed platform," Abul Gheit said.
"There are conditions... we will not negotiate while settlement continues," he said.
On the eve of Netanyahu's Cairo visit, Israel invited tenders for the building of hundreds of homes in Jewish settlements in annexed Arab east Jerusalem.
The Palestinian Authority condemned the tender and the White House said it "opposes new Israeli construction in east Jerusalem."
Netanyahu last month announced a 10-month moratorium on new housing projects in Jewish settlements in the occupied West Bank in a move he said was aimed at helping kick-start the peace talks suspended during the Gaza war a year ago.
The moratorium does not include public buildings or construction under way and does not apply to occupied and annexed east Jerusalem, which Israelis consider part of their capital.
The announcement prompted key ally the United States to express its opposition and the European Union to call for a rethink.
The Egyptian foreign minister had identified the future of east Jerusalem, which Israel captured in the 1967 Middle East war and later annexed in a move never recognized by the international community, as one of the key issues that Mubarak would raise in his talks with the Israeli prime minister.
"We will listen to his points of view and we will inform him that a fair settlement must be reached on the Palestinian refugee problem and east Jerusalem," Abul Gheit said.
Abul Gheit said he would visit Washington in January for talks on the peace process as U.S. President Barack Obama's administration was said to be drafting letters of guarantee for Israel and the Palestinians to serve as a basis for relaunching the talks which have been stalled for almost a year.
"U.S. special envoy George Mitchell will present two draft letters of guarantee, one for Israel and one to the Palestinian Authority during his next visit to the region," one Arab diplomat in Cairo told AFP.
"The United States is hoping that the two letters will serve as a basis for the relaunch of Israeli-Palestinian negotiations but we don't know if they will satisfy the Palestinians, who want a complete freeze of settlement activity before talks resume," the diplomat said.
Washington was currently in talks with the Palestinians and Egypt -- a key U.S. ally in the region -- over the letters, a Western diplomat said.
Former Israeli left-wing MP Yossi Beilin told AFP that Netanyahu was nearing an agreement with the U.S. administration on the principles of the negotiations.
These principles include "a real, albeit indirect commitment by Netanyahu to negotiate Palestinian demands to return to the 1967 borders," including the future status of Jerusalem, according to Beilin.
Limited to 24 months
Netanyahu was also ready to accept the U.S. demand that the peace negotiations would be limited to 24 months, said Beilin, who was among the initiators of the 1993 Oslo accords.
Netanyahu's spokeman Mark Regev said in reaction that "Mr. Beilin only speaks for Mr. Beilin."
Egypt had already asked for written U.S. guarantees before peace talks resume, in order to ensure their aim is the establishment of a Palestinian state within 1967 borders.
"The beginning of negotiations must come either with a complete freeze of settlement activity, which we continue to demand, or if we receive unequivocal guarantees that a Palestinian state will be established along the borders of 1967 including Jerusalem," Abul Gheit said in November.
Netanyahu announced last month a 10-month moratorium on new housing projects in Jewish settlements in the rest of the West Bank but it does not apply to east Jerusalem.
Nor does not include public buildings or construction already under way.