While Palestinian sources described an acrimonious meeting with Israeli negotiators early Thursday morning, US Secretary of State John Kerry said that the talks had "made progress" in narrowing some questions that arose over the last few days.
Speaking during a state visit to Algeria, Kerry said the talks were at a "critical stage" and that gaps remain between the sides that "will have to be closed and closed fairly soon."
He put the onus of closing the deal on Israeli and Palestinian leaders themselves. He urged Israelis and Palestinians to "find the compromise that is critical to be able to move forward."
Kerry claimed that the disagreement between Israelis and Palestinians was "not over the fundamental substance of a final status agreement, it's over process that would get you there."
The US Secretary of State said it would be a "tragedy" for both sides to lose this opportunity "to get to those real issues that are the differences of the final status agreement."
The Bethlehem-based Ma'an News Agency quoted Palestinian sources as saying that the "long and heated" nine-hour meeting attended by Kerry's special envoy Martin Indyk, chief Palestinian negotiator Saeb Erekat and Israel's lead negotiator, Justice Minister Tzipi Livni, ended early Thursday morning without any agreement.
The sources told Ma'an that the meeting had been a "fierce political battle," in which Indyk was forced to mediate heated arguments between the two sides.
According to Ma'an, Erekat told the Israelis, "We are here to negotiate in the name of the UN-recognized State of Palestine, not in the name of a Palestinian Authority whose inputs and outputs are controlled by Israel."
In response the Israeli negotiators, Livni and Yitzhak Molho, threatened to impose "endless sanctions" on the Palestinians if they chose to blow up talks by seeking unilateral recognition, Ma'an reported.
Erekat said that Palestinians would go the International Criminal Court at the Hague to try Israeli leaders as "war criminals" in response to sanctions.
On Tuesday efforts to extend talks stalled after Israel delayed the release of a fourth batch of Palestinian security prisoners and the Palestinians announced their intention to join 15 international organizations.
The proposed deal to extend talks into 2015 would have seen Israel release the 26 prisoners as well as 400 other Palestinian prisoners without "blood on their hands. "
Israel would also have implemented a partial settlement freeze. The PA would have agreed not to seek unilateral recognition in international bodies. The US, for its part, would have agreed to release Israeli spy Jonathan Pollard from prison.