U.S. President Barack Obama vowed on Wednesday that extremists and rejectionists would not derail the relaunch of Israeli-Palestinian negotiations as he opened a peace summit shadowed by Middle East violence.

Wading into Middle East diplomacy in the face of deep scepticism over his chances for securing an elusive peace deal, Obama condemned as senseless slaughter a Hamas attack on Tuesday that killed four Jewish settlers in the occupied West Bank.

The message should go out to Hamas and everybody else who is taking credit for these heinous crimes that this is not going to stop us from not only ensuring a secure Israel but also securing a longer lasting peace, Obama told reporters.

Obama said progress was made in one-on-one meetings he hosted with Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas ahead of direct Israeli-Palestinian talks to be held on Thursday for the first time in 20 months.

The summit marks Obama's riskiest plunge into peacemaking, not least because he wants the two sides to forge a deal within 12 months for the creation of a Palestinian state alongside a secure Israel.

There are going to be extremists and rejectionists who, rather than seeking peace, are going to be seeking destruction. And the tragedy that we saw yesterday, where people were gunned down on the street by terrorists who are purposely trying to undermine these talks, is an example of what we're up against, Obama said.

With the clock ticking towards the September 26 expiration of an Israeli settlement construction freeze that also could undermine the talks, Israel's defence minister sounded a conciliatory note about the prospects for sharing Jerusalem, an issue at the heart of the decades-old conflict.

Netanyahu also seemed to soften his language, calling Abbas my partner in peace and pledging to seek an end to the conflict once and for all, according to excerpts of a speech he is due to deliver at a White House dinner.

But Netanyahu also underscored Israel's demands that any final peace deal include security arrangements to ensure a future Palestinian state, which he says must be demilitarized and would not become an Iranian-sponsored terror enclave.

Deep distrust between the two sides is one of the biggest obstacles to Obama's quest for the so-called two-state solution that has eluded so many of his predecessors.

There is also the danger that failure to achieve an accord could set back Obama's faltering attempts at winning over the Muslim world as he seeks solidarity against Iran.


Militants from the Islamist Palestinian group Hamas declared war on the talks even before they began and warned of further attacks, underscoring the threat hard-liners pose to the fragile peace process.

The attack could make Netanyahu even less likely to accede to Palestinian demands to offer a further freeze in Jewish settlement-building on occupied land in the West Bank.

The looming expiration of Israel's 10-month partial moratorium on new housing construction in Jewish settlements could represent an early stumbling block for the peace talks.

Abbas, who also met Obama privately before a joint White House dinner, has threatened to quit the talks if building resumes on land Israel captured in a 1967 war. Obama's aides have been scrambling for a compromise.

Netanyahu, who heads a government dominated by pro-settler parties like his own, has not given any definitive word on the issue. But his office said he told Secretary of State Hillary Clinton on Tuesday night there was no change in his cabinet's decision to allow the freeze to lapse.

Egyptian President Hosni Mubarak, who is attending the summit, wrote in the New York Times that Israeli settlements were blocking the road to a peace deal with the Palestinians, and Israel must extend its settlement moratorium.


Obama's talks with Netanyahu, Abbas, Mubarak and Jordan's King Abdullah were a warmup for the formal Israeli-Palestinian negotiations on Thursday at the State Department.

Weighing in on peace prospects, Israel's central bank governor Stanley Fischer said its economy, forecast for 3.7 percent growth this year, could improve to 5 to 6 percent annually if peace deals are forged with Arab neighbours.

Ahead of talks eventually expected to tackle volatile core issues that have long defied solution, Israeli Defence Minister Ehud Barak told the Haaretz newspaper the Jewish state would be willing to hand over parts of Jerusalem under a final accord.

There was reason to doubt, however, that Barak's rare comments about the need to partition Jerusalem -- as a junior member of Netanyahu's coalition government -- marked a softening of the rightist prime minister's long-stated refusal to divide the holy city.

The Palestinians want a state in the West Bank and the Gaza Strip, with its capital in East Jerusalem, which was annexed by Israel in a move not recognized internationally.

Commenting on Barak's remarks, a senior Israeli official travelling with Netanyahu said: Jerusalem is on the table at talks, but the prime minister's position is that Jerusalem must remain undivided.

(Additional reporting by Ross Colvin, Steve Holland, Jeff Mason and Alister Bull in Washington and Allyn Fisher-Ilan in Jerusalem; Editing by Will Dunham)