Tempered hope along the road to Mideast peace Only a few days after U.S. Secretary of State John Kerry announced "a basis" for resuming peace negotiations between Palestinians and Israelis, these long-awaited talks are not looking so certain. "We're at a stage here that represents some positive progress, but is not representative of a conclusion of anything," White House press secretary Jay Carney acknowledged Monday, when asked how optimistic President Barack Obama was about the peace process. Mr. Kerry's July 19 announcement, Mr. Carney said, is "an important development, but I don't want to overstate it or understate it." What's the holdup? To be fair, Mr. Kerry didn't promise very much in his announcement Friday. He explained "the agreement is still in the process of being formalized" and that Israeli and Palestinian representatives would convene in Washington "within the next week or so" to work on that formalization. His words, however, were taken to mean that both Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority president Mahmoud Abbas had fully agreed to new peace talks. What's keeping the two sides from agreeing to talks? The same issues as before: Palestinian insistence that Israel stop construction in all West Bank settlements and agree that the borders of a Palestinian state would be based on the ceasefire lines that separated the two sides as of June 4, 1967, before Israel occupied the West Bank and Gaza. Mr. Abbas agreed to temporarily put aside those conditions so the parties could meet in Washington to discuss an agenda for talks, but not the talks themselves. What persuaded Mr. Abbas to agree? After six visits, Mr. Kerry was not prepared to return to Washington empty-handed. By all accounts, he put considerable pressure on the Palestinian leader and that gave rise to the face-saving formula of agreeing to talks only on an agenda. Palestinian commentators report that among the U.S. pressure applied was a threat to cut aid to the Palestinian Authority. It also appears that in the absence of an Israeli agreement to meet Mr. Abbas's demands for a settlement freeze and the use of the 1967 borders, Mr. Kerry offered the Palestinian leader Washington's assurance that the two conditions would be met. Finally, Mr. Abbas may have been assuaged by an Israeli promise to release a substantial number of Palestinian prisoners held for more than 20 years in Israeli jails, although the timing and conditions under which they would be freed remains to be determined. What persuaded Mr. Netanyahu to agree to preliminary talks? Mr. Netanyahu's willingness to release prisoners and to send a representative to negotiate an agenda for talks was not as great a retreat from his previous positions as that of Mr. Abbas. But to the extent that he had to climb down at all, he was likely influenced by last week's decision by the European Union not to do any business or provide financial assistance to any Israeli settlements in the West Bank or east Jerusalem. Though relatively modest, the EU sanctions are an indication of things to come as Israel becomes increasingly isolated because of its settlement policy. Are prospects for negotiations all gloomy? There remain big gaps between the parties when it comes to substantial issues such as the status of Jerusalem and a Palestinian right to return to their ancestral homes now inside Israel. But, on other issues, Mr. Netanyahu has softened his position. He once insisted that, for security reasons, Israel would remain in the Jordan Valley for another 40 years; he now refers to an Israeli military presence there without Israeli sovereignty. He also speaks openly of the problem for Jewish demographics should Israel retain control of the West Bank. Yossi Alpher, the former director of the Jaffee Center for Strategic Studies at Tel Aviv University, says the best that can be hoped for is that the two sides limit their talks to issues of borders and security. In this way, he wrote in his blog for the Americans for Peace Now, they might arrive at "some sort of interim progress" - perhaps an Israeli withdrawal from 20 per cent of the West Bank's "Area C," the area controlled by Israel, and perhaps a security arrangement in the Jordan Valley that would include Jordanian forces as well as Israeli and Palestinian. Such progress might be enough to persuade the two sides to continue talking.