Israeli-Palestinian Talks Stymied by Land Disputes, Violence : Mideast: Negotiators fail to make a breakthrough on expanded self-rule. Arafat and Rabin will meet next week.

Top Israeli and Palestinian peace negotiators met late into the night Tuesday to try to ease the crisis in their deadlocked peace accord, but the issue of new Israeli settlements and the Monday shooting deaths of three Palestinian police officers left both sides grimly unable to announce a breakthrough.

While Israeli Foreign Minister Shimon Peres sought to downplay the difficulties, chief Palestinian negotiator Nabil Shaath said the issues of Palestinian prisoners and Israeli settlement expansion in the occupied West Bank threaten to undermine progress toward an expanded self-rule agreement.

“We are operating here under a great sense of crisis and urgency, and I would be really not telling you the truth if I say things are easy,” Shaath said. “There’s a sense of crisis about . . . moving toward the real fulfillment of the peace process on the Palestinian-Israeli track.”

Peres, who also met with Egyptian President Hosni Mubarak to gain assurances that Arab nations will not impose roadblocks to normalization of relations with Israel, was more optimistic about resolving the current deadlock on the Palestinian front.

“The first stage became a reality against many skeptics. The fact is that there is a Palestinian Authority which is in charge of Gaza and Jericho that has established itself,” he reminded reporters before going into the talks. “We have to overcome a great deal of difficulties, and we are trying to do our best. We are building a new history.”

The two sides broke up shortly before midnight and indicated that Palestine Liberation Organization Chairman Yasser Arafat and Israeli Prime Minister Yitzhak Rabin will meet next week, most likely at the entrance to the Gaza Strip, to try to resolve the deadlock.

“I cannot say we agreed on anything, except that this meeting will take place next week,” Palestinian negotiator Saeb Erekat said in an interview.

He said Israelis listened to a presentation by the Palestinian team documenting expansion of Jewish settlements in the occupied territories and also discussed the issue of Palestinian prisoners, the status of Jerusalem and the death of the three Palestinian police officers Monday night.

“There was a time in part of the session for an exchange of accusations,” he said. “They listened to our analysis and presentation, and we told them, ‘You’re going to have to choose between settlements or peace.’ ”

The talks unfolded in Cairo as thousands of Palestinians, some chanting “Death to Israel and America,” marched through the Gaza Strip in a funeral procession for the Palestinian police officers, killed in a Monday night clash with Israeli soldiers.

Arafat, addressing a crowd demanding revenge, vowed that the blood of the dead officers, killed in a murky, fog-shrouded encounter after Israeli forces claimed they were fired upon, will “light the road toward Jerusalem.”

The shooting incident followed several days of confrontation over planned construction of 500 homes for Jewish settlers on West Bank territory south of Jerusalem, near the existing settlement of Efrat.

A day after halting construction on the hilltop claimed by both Palestinian villagers and Jewish settlers, an Israeli ministerial committee decided Tuesday to let the settlers start building at a nearby site in a few days.

A spokesman for Efrat said the settlement will start building 270 homes at a compromise location at nearby Olive Hill, closer to the existing settlement, as soon as building permits are issued.

PLO officials denounced the compromise and insisted that all new construction at settlements, as well as opening of new settlements, must be halted. They said they will seek to focus on the incompatibility of Jewish settlements on land claimed by Palestinians.

Mohammed Sobieh, the PLO’s Arab League ambassador, said in an interview that the clash that led to the death of the Palestinian officers Monday night would never have occurred if Israeli soldiers had not been present guarding Israeli settlements in the Gaza Strip.

“The situation now is very dangerous for the people and for the police because of the settlements,” he said. “We have said before that it is a big mistake to mix the people, to spread settlements in every corner among the population, then to guard the illegal settlements and give the settlers arms.”

Peres called the shooting of the police officers “a very unfortunate incident.”

“I am sure that the intention of our army was purely to fulfill its mission,” he said. “I regret the loss of life. I hope it will not be repeated. Unfortunately, we shall have to get used (to the fact) that the talks may be accompanied by misunderstandings, even including the loss of life.”

In Gaza, the Palestinian Authority continued to insist that the officers were attacked by Israeli soldiers near the Erez checkpoint without provocation.

“The Palestinian National Authority holds Israel fully responsible for the unjustified attack on our sons, our police,” the Palestinian Authority said in a statement issued by Nabil abu Rudainah, an aide to Arafat.

“This attack left three of our soldiers dead,” the statement said, correcting earlier reports that four policemen were killed. “And the Palestinian National Authority demands from Israel a full investigation and explanation to what the motive behind this attack is. This attack took place on Palestinian land against Palestinian police without any justification.”

A committee of Israeli army and Palestinian police officers will investigate the incident, an army spokesman said Tuesday.

Israeli military briefers said Tuesday that a “third party” may have opened fire on an Israeli army patrol that was on Israeli-held territory near the Erez checkpoint Monday night, triggering the worst exchange of fire between Israeli and Palestinian security forces since the hand-over in July of the Gaza Strip to the PLO.

The army said that the soldiers on patrol called for reinforcements but that the reinforcements were fired on by the Palestinian police from a police building just south of Erez. The reinforcement force charged the police position after first calling on those inside to surrender, the army said.

Murphy reported from Cairo and Curtius from Jerusalem.