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Middle East Newsline - Updated Daily

THE ISSUES

The future of a Palestinian entity: Both Israel and the Palestinians agree that they should establish a state. They argue over the level of that state's sovereignty, particularly concerning military affairs. The United States expects this problem to be resolved in a staged agreement.

The future of Jewish settlements: Israel insists that at least tens of thousands of Israelis remain in the West Bank in two tiny enclaves near the 1967 border. The Palestinians want the settlements to be uprooted. Again, the United States will seek to propose a gradual process that will review the presence of Jewish settlements in the future.

Jerusalem: Israel insists on formal control of the city. The Palestinians want at least eastern Jerusalem to be their capital. Redrawing the boundaries of the city appears to be the most likely compromise.

Palestinian refugees: The Palestinians want refugees to be given the right to return to their homes in what is now Israel or receive compensation from Israel. Israel has refused to formally recognize this right. The United States is working on a formula that will taken both interests into account.

The end of the Israeli-Palestinian conflict: Neither side wants to leave the summit without a complete settlement but they are willing to delay issues until a later date. The difference is that Israel wants a Palestinian commitment that the conflict with Israel is over and it will never launch violence against the Jewish state. Again, a formula that relies on creative writing could be the answer -- for now.

Opposition to Arafat and Barak: Arafat's opposition will attack any agreement and aides to the Palestinian leader have pledged to hold a referendum. But privately Arafat has told his critics that whatever happens, future generations of Palestinians will decide whether they want to continue the conflict with Israel. Barak's opposition is regarded as much weaker. His biggest problem is that his coalition is crumbling, with even Foreign Minister David Levy refusing to attend the summit because of objection to the agenda. Barak is hoping that the United States can convince the Arabs that any settlement of the Israeli-Palestinian conflict will lead to full diplomatic and trade relations with virtually the entire Arab world.