Israel Stops Palestinian Prisoner Release amid Talks Crisis

Israel has told the Palestinians that a planned release of 26 prisoners cannot proceed, placing already embattled peace talks in further jeopardy after both sides took steps Washington called "unhelpful."

Israel's chief negotiator with the Palestinians has told them that the planned release cannot go ahead, a source close to the embattled talks told Agence France Presse on Thursday.

A frustrated U.S. Secretary of State John Kerry earlier demanded that recalcitrant Israeli and Palestinian leaders demonstrate leadership in the crisis-hit peace process.

Speaking on condition of anonymity, the source said Justice Minister Tzipi Livni told a meeting with her counterparts on Wednesday that the prisoner release could not happen because the Palestinians had resumed a diplomatic campaign meant to challenge Israel more fully in the international arena.

The talks hit a new impasse when Israel failed to free the prisoners as expected at the weekend.

In response, the Palestinians formally requested accession to several international treaties.

The source said Livni told the Palestinians that her government had been seeking to expedite the release when the Palestinians submitted their accession request to U.N. bodies, and that they had therefore breached their commitments under the terms of peace talks restarted under U.S. auspices last July.

It said that Livni urged the Palestinians to cancel the move and return to talks.

White House spokesman Jay Carney called Israel's decision a further "challenge" to peace efforts.

"The decision by the Israelis to delay the release of the fourth tranche of prisoners creates challenges," he said.

U.S. officials said that Kerry, who has pursued more than a year of intensive shuttle diplomacy, spoke by phone to Israeli Prime Minister Benjamin Netanyahu on Thursday afternoon, and to Palestinian President Mahmoud Abbas later, but they gave no details.

Kerry said in Algiers that Israelis and Palestinians made "progress" in lengthy overnight talks in Jerusalem, also attended by the Americans.

His efforts appeared to be on the brink of collapse this week after Israel announced a fresh wave of settlement tenders and the Palestinians resumed international recognition moves.

Washington described them as "unhelpful, unilateral actions", but insisted diplomacy still had a chance.

Kerry threw down the gauntlet, telling both sides it was time for compromise at what he called a "critical moment" in the peace process.

"You can facilitate, you can push, you can nudge, but the parties themselves have to make fundamental decisions to compromise," he said.

"The leaders have to lead, and they have to be able to see a moment when it's there."

He said, however, that progress was made at a meeting between Livni, U.S. special envoy Martin Indyk and Palestinian negotiator Saeb Erakat that lasted until 4:00 am Thursday.

The overnight marathon "focused on the necessity of releasing the prisoners," a Palestinian official told Agence France Presse on condition of anonymity, adding that the applications for accession to several international treaties were "irreversible."

Each side accused the other of violating undertakings given when the talks began.

"The ball is in Israel's court now. It should release the prisoners," former Palestinian negotiator Mohammed Shtayeh told AFP.

The moves dealt a hammer blow to Kerry's frenetic efforts to broker an extension of the negotiations beyond their original April 29 deadline.

U.N. Middle East peace envoy Robert Serry confirmed receiving the Palestinian applications, with a spokesman for the secretary general saying they would consider the "appropriate next steps."

The first treaty the Palestinians applied to was the Fourth Geneva Convention, which holds huge symbolic importance as it provides the legal basis of their opposition to Israeli settlements in the occupied territories.

In Israel, there was surprise and anger over the Palestinian move.

"The Palestinians have returned to a diplomatic intifada," one political official told Yediot Aharonot newspaper, using the Arabic word for uprising.

Pro-government daily Israel HaYom said efforts were under way to compile a list of more prisoners who could be freed should the sides agree to extend the talks.

It said top officials agree that the potential security repercussions of a talks collapse "will be far greater than the price that Israel will be required to pay for extending the negotiations."