By Jeffrey Heller
JERUSALEM (Reuters) - Israel and the Palestinians on Wednesday held their highest-level talks since Israeli Prime Minister Benjamin Netanyahu took office, focusing on economic issues while formal peace negotiations remained stalled.
The meeting was a signal from both sides that dialogue is possible despite differences Washington has been trying to bridge.
"This meeting was unrelated to political negotiations," Palestinian Economy Minister Bassem Khoury told Reuters after his talks with Israeli Vice Prime Minister Silvan Shalom.
Israel has been easing travel restrictions for Palestinians in the occupied West Bank in a declared bid to shore up President Mahmoud Abbas and the local economy, while maintaining a blockade of the Gaza Strip, an enclave run by Hamas Islamists.
Khoury said he and Shalom had discussed West Bank imports and travel permits, as well as policies on the transfer of goods and money to Gaza and Israel's control of frequencies sought by Palestinians for their Wataniya mobile telephone network.
He described the talks as "positive" and said he and Shalom agreed to meet again in six weeks.
Shalom told reporters: "I think that the Palestinians have understood that there is no point in continuing to boycott the talks with Israel and that these talks will not be conditioned by any concessions on our part."
In the West Bank, Nabil Abu Rdainah, a spokesman for Abbas, reaffirmed the Palestinian position that peace talks, suspended since December, could not resume without an Israeli commitment to freeze settlement in the occupied West Bank.
He said the Jerusalem meeting, the first between Israeli and Palestinian cabinet ministers since Netanyahu's government was inaugurated in March, "fell within the framework of economic issues and was not related to political negotiations."
U.S. ENVOY
Later in the day in New York, the U.S. special envoy for Middle East peace, George Mitchell, planned to meet two Israeli officials as part of his push to restart negotiations leading to a peace deal and Palestinian statehood.
U.S. President Barack Obama has taken the public stance that Israel must halt all settlement activity under a 2003 peace "road map." Palestinians say settlements, built on land Israel occupied in a 1967 war, could deny them a viable state.
Netanyahu, who heads a right-leaning government, has resisted a complete construction moratorium, saying settlers were entitled to lead what he termed "normal lives."
A settlement deal would end the most serious rift in U.S.-Israeli relations in a decade and could lead to an announcement by Obama, during the U.N. General Assembly later this month, of a resumption of Middle East peace talks.
Javier Solana, the European Union foreign policy chief, said in Cairo after talks this week in the region, he was "working very hard" with Washington for a possible resumption of Middle East peace talks by the month's end.
"I think something is moving," Solana said.
(Additional reporting by Edmund Blair in Cairo and Ali Sawafta in Ramallah; editing by Janet Lawrence)
(For blogs and links on Israeli politics and other Israeli and Palestinian news, go to http://blogs.reuters.com/axismundi)
