Israel and the Palestinians began substantive talks in Jerusalem on Wednesday, amid extremely low expectations on the Israeli side and Palestinian threats that Israeli announcements of settlement plans could torpedo the talks.The talks were held under a complete media blackout, with neither the location nor time of the negotiations made public, let alone any mention of what topics are on the initial agenda. The talks will take place following the release late Tuesday night of 26 Palestinian terrorists.Yaakov Lapin and Jerusalem Post staff contributed to this report.Defense Minister Moshe Ya’alon expressed deep skepticism when asked during a tour of the North whether he thought the talks would lead to a breakthrough.“We set ourselves the goal of nine months in which we will try to reach something with the Palestinians,” he said. “We’ve been trying for 20 years since Oslo, and for over 120 years of the conflict.The skepticism in the tone of my remarks is apparent, but we’ve decided to give it a chance.”Israeli officials dismissed as “overstated” speculation that fears of Israel’s being delegitimized in the world is what motivated Netanyahu to return to the table. At a speech in June to the American Jewish Committee, Kerry warned that the “insidious campaign to delegitimize Israel will only gain steam” if the talks fail.One government official said that Netanyahu believes that a Palestinian state is in Israel’s interest because of demographic reasons, in order to keep Israel a Jewish democracy, and to fend off attempts to delegitimize it.But, the official said, “he also believes that a Palestinian state that looks like Gaza does today – hostile, in the Iranian orbit, and one that fosters terrorism against Israel – is something that we cannot afford.”On the Palestinian side, senior Palestinian official Yasser Abed Rabbo warned that advancing settlement construction plans could lead to the breakdown of the talks.“Settlement expansion goes against the US administration’s pledges and threatens to cause the negotiations’ collapse,” he told AFP.His comments came after the Construction and Housing Ministry announced Sunday that it intends to publish tenders for 1,187 new Jewish homes over the pre-1967 lines, and the Interior Ministry advanced plans on Monday for 900 new Jewish home units next to the Gilo neighborhood.It will be years before any of these plans come to fruition.“This settlement expansion is unprecedented,” AFP quoted Abed Rabbo as saying. “It threatens to make talks fail even before they’ve started.”However, US Secretary of State John Kerry said on Monday that Israel’s announcement of plans for the new units was “to some degree expected.”He urged Israelis and Palestinians to move forward with peace talks.“What this underscores is the importance of getting to the table, getting to the table quickly,” said Kerry during a trip to Colombia, calling on the Palestinians “not to react adversely” on the eve of the second round of negotiations.“The United States of America views all of the settlements as illegitimate,” he added.He said he spoke with both Netanyahu and Justice Minister Tzipi Livni about the matter, and characterized the conversation with Netanyahu as “frank and open.”Officials in Washington said Kerry’s response was carefully crafted to reinforce Washington’s existing position against further settlement construction but also prevent destabilization of the peace talks.State Department deputy spokeswoman Marie Harf reiterated the US position on Tuesday, calling the settlements announcement of “serious concern” and stating that the US position on such construction remains “unchanged.”“[Kerry] made clear what our position is,” Harf said. “There’s a reason we want both sides to the table.”Harf said that the State Department had “no reaction to the specific announcement” on east Jerusalem housing, but broadly called settlements one of the many “sticky issues” that will create bumps in the road to peace.“In no way are we throwing up our hands on settlements,” she said, acknowledging that there are “incredibly serious consequences” for such actions.“We still believe” both sides are at the table “operating in good faith,” she added, confirming that the talks will continue as scheduled.Asked whether the US considered the Palestinian security prisoners to be released by Israel as political prisoners or terrorists, Harf said she was unaware of the government’s position.The Israeli team to Wednesday’s talks will be represented by Livni and Netanyahu’s personal envoy, Yitzhak Molcho, with the Palestinians represented by chief PLO negotiator Saeb Erekat and senior negotiator Muhammad Shtayyeh.US special envoy Martin Indyk is expected to participate.Indyk, who met Palestinian Authority President Mahmoud Abbas on Sunday, is scheduled to meet Netanyahu on Wednesday.Indyk is accompanied by Frank Lowenstein, a former top aide to Kerry who worked with him in the Senate and also on his unsuccessful 2004 presidential campaign. He worked closely with Kerry since March in his efforts to restart the talks.