During recent peace talk discussions, Justice Minister Tzipi Livni, who heads the Israeli negotiations team and Prime Minister Binyamin Netanyahu's representative, Yitzhak Molcho, came to loggerheads on issues relating to the size of the area designated for the free movement of Israelis and Palestinians in Jerusalem, Israel Radio reported on Tuesday.

According to the report, Molcho asked to restrict the boundaries as much as possible, bordering on east Jerusalem, while Livni showed a more flexible stance.

Israel's opening position on the borders is the actual path of the separation barrier rather than the pre-1967 lines as demanded by the Palestinians, Israel Radio reported.

Israel wishes to retain not only the settlement blocs, but also some isolated settlements beyond the barrier, such as Psagot and Beit-El, the report added.

Israel has also stated that it will keep its hold on the Jordan Valley and its water resources, but Palestinians will be allowed to purchase water from Israel.

To date, the negotiating teams have held fifteen meetings, each of which lasted 3-4 hours. US negotiator Martin Indyk recently joined the table, and is actively attending the latter part of the meetings, according to the report.

Sources at the Prime Minister's Office deny the issue concerning the borders, and added that it has been made clear to the Palestinians that Jerusalem will remain under Israeli sovereignty with its present borders.

Livni's office offered no comment, but stated that the the report was unfounded and meant to harm negotiations. The office added that Livni and Molcho were working in full collaboration.

The report came as US Secretary of State John Kerry was due to arrive on Tuesday to visit Israel and the Palestinian territories, and to advance the Israeli-Palestinian peace process.

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