Settlement Issue Looms Over Obama, Abbas Meeting

Halting efforts to form a unity government fell apart completely in 2007 in a hail of gunfire. Hamas ousted Abbas' Fatah Party from Gaza in the summer of 2007, leaving Fatah controlling only the West Bank.

Polls show Abbas' standing among Palestinians was further weakened by his inability to stop Israel's incursion into Gaza six months ago. But Abbas still has the authority to pursue peace, insists Saeb Erekat, the chief Palestinian negotiator.

SAEB EREKAT, chief Palestinian negotiator: President Abbas is the elected Palestinian leader. And our basic law, it's the president who conducts the negotiations. And once the negotiations reach an agreement, President Abbas, in accordance with our basic law, must put this agreement to national referendum.

MARGARET WARNER: So far, Hamas, which refuses to recognize Israel and has been branded a terrorist organization by the West, has not been part of peace talks. But Khalidi says Hamas must be brought into the government for the peace process to have credibility.

RASHID KHALIDI: Hamas won the last election in 2006. It got more votes than Fatah, only 1 percentage point more, but still more than Fatah. It is clearly a powerful factor in Palestinian politics.

MARGARET WARNER: Hamas' hints of interest in taking part need to be explored, he says.

RASHID KHALIDI: That proposition is well worth testing. The alternative, I think, is hopeless. I don't think you can negotiate with a government that represents a fraction, probably well under half, of the Palestinians.

SAEB EREKAT: We want Hamas to come back. We want Hamas to be part of the political fabric of Palestinian politics. And what we're telling Hamas is that we need to form a national unity government. We have obligations that must be respected and honored. We have responsibilities. We must act as a responsible government.

MARGARET WARNER: Hamas doesn't have to explicitly recognize Israel, Erekat says, simply be willing to join a Palestinian government that does.

You've been talking to Hamas in these sessions. Are they interested?

SAEB EREKAT: They say they are, and I think we're going to be seeing that very soon.

MARGARET WARNER: Today's meeting comes against the backdrop of a public tug-of-war between Washington and Jerusalem over Israel's settlement activity. That topic was front and center when the two leaders met with reporters afterwards.

BARACK OBAMA: And in my conversations with Prime Minister Netanyahu, I was very clear about the need to stop settlements, to make sure that we are stopping the building of outposts, to work with the Palestinian Authority in order to alleviate some of the pressures that the Palestinian people are under, in terms of travel and commerce, so that we can initiate some of the economic development plans that Prime Minister Netanyahu himself has said are so important on the ground.

MAHMOUD ABBAS, president, Palestinian Authority (through translator): Mr. President, I believe that time is of the essence. We should capitalize on every minute and every hour in order to move the peace process forward, in order to cement this process, in order to achieve the agreement that will lead to peace.