Palestinian officials said today "Israeli obstinacy" made Washington give up on efforts to freeze Jewish settlement and questioned whether the United States could ever help them attain independence.
Senior Palestinian official Yasser Abed Rabbo said that with its bid to revive direct Israeli-Palestinian negotiations now at a dead-end, the United States was proposing a return to indirect talks to try to unstick a peace process in deep crisis.
The Palestinians had demanded a halt to Israeli settlement building in the West Bank and East Jerusalem before agreeing to resume direct talks in pursuit of the establishment of a sovereign Palestinian state alongside Israel.
Under Ud stewardship, the Israeli and Palestinian leaders held three rounds of talks in September. But the Palestinians pulled out when Israel's 10-month freeze on West Bank settlement building came to an end on September 26th.
Israel says a settlement freeze was a precondition that never existed in previous stages of the 20-year-old peace process. It says Palestinian president Mahmoud Abbas took too long to sit down for talks after prime minister Benjamin Netanyahu announced the temporary moratorium in November 2009.
It had not included East Jerusalem.
he US announcement was a big setback for president Barack Obama, who believes settling the Middle East conflict is "a vital national security interest".
When launching the talks in September, Mr Obama said he hoped to have a peace deal signed within a year.
Abed Rabbo, a senior aide to Mr Abbas, said in an interview with Voice of Palestine radio that US policy had changed "because of Israeli obstinacy and rejection".
If the United States could not get Israel to halt settlement "for a limited period", how would it be able "to make Israel accept a balanced solution on the foundation of international resolutions and the two-state solution?", he asked.
The Palestinians were also surprised the United States had not condemned Israeli policy, he added.
Chief Palestinian negotiator Saeb Erekat said Mr Obama must hold Israel to account for "the failure of the peace process".
US officials said Israel had been willing to extend the moratorium on West Bank construction but refused to halt building in and around East Jerusalem -- land it views as part of its capital.
The US failure would "cost it in the region", said Samih Shabib, a political scientist at Birzeit University near Ramallah. "Its credibility has become very weak among the Palestinians and Arabs."
Israeli government spokesman Mark Regev said Israel remained determined in its "commitment to continue the current effort to achieve a historic peace agreement with the Palestinians".
Officials in Washington said the United States was weighing the option of holding separate discussions with both sides -- a return to the indirect talks conducted for much of last year along shuttle diplomacy lines as in past US mediation bids.
The officials said senior Israeli and Palestinan officials were expected in Washington, possibly within the next week.
Mr Netanyahu's pro-settler ruling coalition had lobbied fiercely to oppose a freeze, accusing the Palestinians of seeking to determine the borders of a future state before addressing other core issues.
Reuters