Talks between Israeli and Palestinian negotiating teams opened Monday with major differences on the table, but with both sides committed to making a concerted effort to produce a significant framework agreement for the parley in Annapolis, Md.
In the run-up to the talks, both sides had spoken of a "good, constructive atmosphere." Palestinian negotiator Saeb Erekat declared that the Israeli side "seemed serious," and that both Prime Minister Ehud Olmert and Palestinian Authority President Mahmoud Abbas had "the wisdom to make the right decisions for peace."
Outside the formal talks, the focus was on Jerusalem.
In a Cabinet meeting Sunday, Olmert's close confidant Haim Ramon caused a political storm when he repeated his view that Israel should be ready to hand over Arab neighborhoods in Jerusalem to the Palestinian Authority. Government hawks and right-wing opposition legislators branded it a sellout.
Pundits suggested that Olmert is using Ramon as a front man to prepare Israeli public opinion for concessions on Jerusalem. They say Olmert may adopt the same tactic as Ehud Barak did at Camp David in July 2000 and offer concessions on Jerusalem in a trade-off for Palestinian compromises on the refugee issue.
The Palestinians want the Annapolis conference and the ensuing peace talks to be based on the Arab League peace plan; President Bush's vision of two states, Israel and Palestine; and the internationally approved "road map."
Israel wants to include a reference to Bush's April 2004 letter to then-Prime Minister Ariel Sharon indicating that it can retain large Jewish settlement blocs in the West Bank.
What all this boils down to is a border based on the 1967 Green Line between Israel and the West Bank, with land swaps enabling Israel to keep West Bank settlements, and with the proviso that nothing will be implemented on the ground until the Palestinians put a stop to terror against Israel.
At the opening of the Knesset's winter session Monday, Olmert underlined his resolve to give the new peace process every chance of success.
"I am determined to make brave but inevitable decisions that will mean foregoing the full achievement of dreams that fueled our national ethos for years," he declared.
However, under pressure from the hawks in the coalition and his Kadima Party, Olmert was careful not to spell out details of the far-reaching concessions he was prepared to make. Over the past few weeks the prime minister has been mostly keeping mum.
Ramon has been making all the real noises -- presumably with the prime minister's approval.
In Sunday's Cabinet meeting, Ramon put the Jerusalem issue squarely on the national agenda when he proposed that the Palestinians get the Arab neighborhoods and Israel the Jewish ones. This would enable both countries to have Jerusalem as their capital city and pave the way for international recognition of Jewish Jerusalem as Israel's capital.
As for the holy basin, which includes the Old City of Jerusalem as well as Muslim, Christian and Jewish holy places outside its walls, Ramon said it should have a "special regime," to be defined at a later stage in the negotiations.
The political furor sparked by Ramon's remarks was exacerbated Monday by an article in the London-based Palestinian newspaper Al-Quds al-Arabi claiming that Olmert and Abbas had already reached an agreement to place the holy basin under Jordanian administration.
Palestinians in the Old City would get Jordanian identification cards, and the two sides reportedly also were considering a supreme advisory council for Jerusalem comprised of representatives from the United Nations, Jordan, Egypt, Israel and the Palestinians.
Olmert's office adamantly denied any such agreement. Ramon said it was far too early to discuss the nature of the regime in the holy basin.
Nevertheless, the right pulled no punches.
"For Israel to give up its right to Jerusalem is to commit suicide," declared Arye Eldad, a right-wing National Union legislator.
"In Annapolis, they will discuss the division of Jerusalem," opposition Likud leader Benjamin Netanyahu snapped sarcastically.
One major coalition partner seemed to agree.
The ultra-Orthodox Shas Party announced that it was against any concessions in Jerusalem. And inside Olmert's own Kadima Party, Transportation Minister Shaul Mofaz argued that proposals to divide Jerusalem would never receive majority approval by the Cabinet or Knesset and, given the shaky nature of the Palestinian regime, should not have been made.
"You go to sleep with Abbas not knowing who you'll wake up with," Mofaz said, "so don't make hard and fast commitments."
In Sunday's Cabinet meeting, however, Ramon received some unexpected support.
Avigdor Lieberman, leader of the hawkish Yisrael Beiteinu, declared that he, too, was ready to give the Palestinians parts of Jerusalem -- like the Shoafat refugee camp -- on condition that the handover be part of a wider territorial and population exchange.
"We don't want a situation in which there will be 600,000 Arabs in Jerusalem in 30 years time," Yisrael Beiteinu legislator Yisrael Hasson said.
Lieberman's support is key. Indeed, the Ma'ariv newspaper claims that there is now a majority in the Cabinet for dividing Jerusalem.
The Palestinians, according to senior Israeli officials, see themselves in a win-win position: Either Israel makes far-reaching concessions or risks being blamed by the United States for failure at Annapolis.
Indeed, the officials claim, if the Palestinians don't get what they want in the run-up to Annapolis, they will engineer a crisis in the talks in an attempt to get the Americans to lean on Israel in order to save the U.S.-initiated parley.
Olmert is also playing a shrewd game. In making his super-dovish remarks, he is preparing public opinion for the concessions he thinks Israel will have to make. But at the same time, Olmert is building a strong alibi to escape American blame if the process breaks down.
As the process unfolds, both sides are showing enormous good will, but both also face enormous domestic opposition -- Olmert from the hawks, Abbas from the terrorist Hamas.
Leslie Susser is the diplomatic correspondent of the Jerusalem Report.