RAMALLAH/JERUSALEM: Israeli Prime Minister Ehud Olmert yesterday decreased his optimism that Israel and the Palestinian Authority can reach a final peace agreement that includes the issue of Jerusalem by the end of 2008. He asserted yesterday that the two won’t be able to achieve their declared goal of forging a peace deal by the end of the year, citing conflicting claims to Jerusalem as the main obstacle.

“I don’t believe we’ll be able to reach an understanding which will include the Jerusalem issue this year,” Olmert told the Israeli Knesset’s Foreign Affairs and Defense Committee (FADC). At the same time, Olmert said Arab neighborhoods in East Jerusalem posed a danger to Israelis, hinting that Israel might want to cede control of these areas. Israel captured the eastern part of Jerusalem from Jordan in the 1967 Mideast War and annexed it.

Palestinians claim the eastern sector as capital of their future state, and the fate of the disputed city lies at the crux of the Israeli-Palestinian conflict. At an international conference in the US in November, Olmert and Palestinian President Mahmoud Abbas set a year-end target for reaching a final peace deal that would resolve the decades-old conflict between their peoples. Olmert said that target was unrealistic because of disputes over Jerusalem. “There is no practical chance of reaching a comprehensive understanding on Jerusalem” during 2008, Olmert said, adding that the sides would continue discussing the city’s fate after the deadline.

Differences on other key issues, such as the final borders of the Jewish and Palestinian states, and the future of Palestinian refugees, were not “dramatic,” he said.

Both Israel and the Palestinians have expressed serious doubt in recent months about attaining their goal of a fleshed-out deal by the end of the year. But Olmert’s comment was the clearest indication yet that the Israeli leadership sees the target as unattainable.

Abbas aide Nabil Abu Rudineh said Olmert’s comments showed Israel had given up on its promise. “This is a clear violation of the Annapolis agreement,” he said. “We still have six months, and that means Israel isn’t serious about reaching an agreement according to Annapolis and Bush’s vision.” Palestinians account for about one-third of the 750,000 people who live in Jerusalem. They are not Israeli citizens, but have access to Israeli social benefits and can move throughout Israel, unlike the Palestinians of the West Bank and Gaza.

With input from agencies