After 35 years in office, the Saudi foreign minister says his biggest regret is the lack of an Israeli-Palestinian peace agreement. In the LA Times, an international law expert affirms that settlements in occupied territories are illegal, and a separate report highlights the rise of religious extremism in Israel. The Christian Science Monitor analyzes the PLO's move to extend Pres. Abbas' term pending new elections. In a Herald Tribune commentary, Mustafa Barghouti warns that time is running out for a two-state solution. The AP profiles a Palestinian village in the occupied West Bank surrounded by settlements. Several reports examine the tragic consequences of last year's war in Gaza. Ha'aretz provides details of former PM Olmert's peace proposal, which reportedly involved Israel annexing 6.3% of the West Bank and much of East Jerusalem. Hamas reaffirms its intention to "liberate all of Palestine," and is reportedly inclined to accept Israel's current offer on a prisoner exchange. Egypt chides the organization for "foot dragging" on Palestinian reconciliation. JJ Goldberg critiques four common opinions about Israel and the occupation, and Michael Young says for all its imperfections, the Oslo framework offers the only chance of peace. In a highly unusual move, the pan-Arab daily Asharq Al- Awsat runs an "open letter to the Arab world" from Israel's Deputy Minister of Foreign Affairs, Danny Ayalon.

The New York Times looks at the controversy over PM Netanyahu's intentions on peace. The PLO extends the terms of Pres. Abbas and the Palestinian parliament in light of Hamas'refusal to agree to new elections. Israel's Consul General to New England says his country is ready for peace. Egyptian mediators propose a reconciliation summit between Fatah and Hamas, as student groups clash in Gaza and Hamas says 80 of its members have been arrested by PA police. The EU is set to deliver €200 million to the PA over the next three years. Abbas says that peace is possible in six months if Israel agrees to complete settlement freeze, and reports suggest that the US, Egypt and France are planning to try to restart peace talks based on the 1967 borders involving a complete but unannounced freeze. The new EU foreign policy chief will be traveling to Jerusalem. Israeli police raid the home of nonviolent Palestinian protesters. Jewish extremists plan another provocative march in occupied East Jerusalem. A commentary in the Guardian says Jewish internal dialogue about Israel needs to be more civil. Rami Khouri says that it's unfair for anyone to blame the Goldstone report for the present diplomatic impasse.

Pres. Abbas lays down conditions for returning to peace talks, rules out resumption of violence. The Washington Post's profile of two Palestinian brothers, one in the West Bank and the other in Gaza, illustrate growing political divisions in Palestinian society. The Christian Science Monitor says Egypt's Gaza border wall has deep strategic significance, and asks whether soldiers will obey extremist rabbis or PM Netanyahu. The Voice of America reviews the year of stalemated peace talks. PM Fayyad says Palestinian state building is underway. A report in Ha'aretz looks at tax exempt US funding for extremist settlers, including a rabbi who recently rationalized the killing of non-Jewish babies. Both Israel and the UK confirm that a British court issued and then withdrew an arrest warrant for former Foreign Minister Tzipi Livni. The Guardian profiles Palestinian "tunnel tycoons." The EU is formally reviewing its ties to Israel because of skepticism about its intentions on peace. Husam Itani says Palestinians are partly to blame for their own predicament and a commentary in the Arab News says Netanyahu is not serious about peace at all. In Bitter Lemons, Ghassan Khatib calls for increased international engagement to promote serious negotiations and Issa Samander suggests that Israelis would see realities differently if settlers were returned to Israel and behaved there as they do in the occupied Palestinian territories.

The West Bank is tense after extremist settlers torch a mosque in the occupied territories. The Christian Science Monitor reports that the Israeli government claims that enforcing the settlement moratorium requires ignoring existing court orders to dismantle unauthorized settlements. Israel's cabinet has adopted a "national priority" map ensuring more funds for some settlements. As Hamas celebrates its 22nd anniversary, Fatah says Palestinian reconciliation talks are stalemated. Reports suggest that Pres. Abbas has written to PM Netanyahu urging him to finalize a prisoner exchange, but that Iranian Pres. Ahmadinejad has told Hamas leaders to take their time. A report suggests that Israeli opposition leader Tzipi Livni canceled a visit to the UK for fear of arrest over the Gaza war. Army-funded rabbis continue to urge soldiers to disobey orders. An Israeli town refuses to allow a Palestinian to build on his own land. Netanyahu will reportedly take a direct role in deciding future demolitions of Palestinian homes in occupied East Jerusalem. The Independent recalls the Gaza war one year on.

The New York Times blog investigates how Israel is attempting to use YouTube for propaganda purposes. A commentary in the Christian Science Monitor says Pres. Obama 's Nobel Prize does not sit well with Arabs or Palestinians because of the impasse in peace talks. Extremist West Bank settlers allegedly set fire to a mosque. Palestinian Christians call the occupation a "sin." An Israeli Cabinet minister predicts a settler population could grow by as much as 10,000 in the coming year. Israeli negotiations with the Vatican fail to change church policies. The EU calls the Palestinian police the cornerstone of a future state. The Jerusalem Post argues the US is scaling back Middle East diplomacy because of disappointment on peace talks. In the context of statehood, the PA is reportedly planning to resurrect the Palestinian pound. Reports continue that Egypt is building a wall along and underneath its border with Gaza, but the Egyptian government strongly denies this, and an editorial in the National says Israel and not Egypt is responsible for the humanitarian crisis in Gaza. Israel's ambassador to the US calls J Street a "unique problem."

Israel arrests a leader of nonviolent opposition to the settlement barrier in the occupied West Bank, and disrupts the farewell ceremony for UNRWA's outgoing chief. Swedish officials say the EU resolution on Jerusalem is very close to their original proposal. Israeli military officials say Palestinians are trying to coerce Israel into accepting Palestinian statehood. More Israelis approve of Pres. Obama, but still do not feel that he supports Israel. The BBC looks at divisions between Fatah and Hamas in Nablus. Jailed Fatah leader Marwan Barghouti is profiled by the Independent. PM Salam Fayyad says Palestinians will not issue a unilateral Declaration of Independence. Gideon Levy says Israel is a "semi-theocracy." Michael Jansen says the Arabs should take advantage of the recent EU declaration on Jerusalem, and the Swedish ambassador to Jordan reaffirms European concerns about human rights in the occupied territories. Israeli FM Lieberman expresses sympathy with extremist settlers. In Bitter Lemons, Ghassan Khatib says Israeli pressure must be resisted, and Daniel Seidemann says the EU resolution is neither revolutionary nor trivial.

The New York Times says Israelis are united around the release of captured soldier Galid Shalit. Hamas sources say the swap is now up to Israel, and still may include jailed Fatah leader Marwan Barghouti. The EU has adopted a motion saying Jerusalem should be shared rather than divided, and the US says it is an issue for negotiations. Israel's Ambassador to the US Michael Oren defends his government's settlement moratorium policy in the Wall Street Journal, but Peace Now says building in the occupied territories is continuing briskly. Meanwhile, Palestinians are being prevented from building in "Area C." Extremist Israeli settlers threaten violence against Palestinians in response to the moratorium and a commentary in Ha'aretz complains that Israeli policy has made all Israelis into settlers. PM Netanyahu claims Palestinians have made a strategic decision to delay talks. A PA police officer has been sentenced to death for collaboration with Israel. The Guardian highlights health risks to Gaza children from contaminated water and a Huffington Post commentary describes nonviolent resistance to the occupation and the separation barrier in the West Bank town of Qalqilya.

The LA Times runs an obituary of Edward Sanders, Middle East adviser to Pres. Carter. Speculation continues to swirl around a possible prisoner exchange between Israel and Hamas, and the possible inclusion of jailed Fatah leader Marwan Barghouti. The German mediator has asked Hamas to stop press leaks. Israel is reportedly planning to build a wall along the Egypt-Gaza border, and is banning foreign leaders from visiting the Strip. Israel's justice minister has come under heavy criticism for saying that Jewish religious law should be paramount in Israel. Ha'aretz runs a commentary questioning whether Israel is interested in peace, and another arguing that the settlers' own extremism will prove their undoing. A commentary in the Guardian points out how much American financial support underwrites settler extremism. The head of UNRWA says the plight of the refugees must be addressed. The Tablet website profiles PM Fayyad.

The Washington Post says the PA government state building plan could provide the key to peace, the Arab News points out that no one has any better ideas, and the World Bank is donating $64 million toward the effort. Israel closes the only oil and gas terminal on the Gaza border. AFP profiles the plight of Palestinian refugees in Lebanon. Egypt says Israel is stalling on a prisoner exchange with Hamas, and may offer a new plan for Palestinian reconciliation. Jordan's Foreign Minister confirms his country's interest in the creation of a Palestinian state. Israel is ignoring 400 Palestinian home demolition appeals. A commentary in Ha'aretz says the settlement moratorium is part of a "masquerade," and the paper also interviews an extremist Jewish settler. Israeli diplomats are preparing to combat a Swedish EU initiative to recognize occupied East Jerusalem as the Palestinian capital. The Media Line profiles the new Palestinian "planned" city in the West Bank, and some Zionists around the world express outrage at the Jewish National Fund decision to donate 3,000 trees to the project. Ir Amim explains the dangers of new settlement construction in occupied East Jerusalem. The Daily Star reviews Joe Sacco's new graphic novel "Footnotes in Gaza."

Extremist settlers continued to defy the building moratorium, and the Israeli military fears they may attack Palestinians. A confidential EU report accuses Israel of de facto annexation of occupied East Jerusalem. Martin Indyk suggests that ensuring Palestinian control over West Bank territories is essential. Israelis are divided on the prospect of a prisoner swap with Hamas, and the two sides have both rejected mediator's proposals. A militant group claims to have attacked Israeli occupation forces in Gaza, which is suffering under a fuel and power crisis. The UAE is donating $2.5 million to UNRWA after the agency announced a zero balance. Ziad AbuZayyad says PM Netanyahu has to prove he is interested in peace. Ha'aretz says that while Hamas is imposing strict religious social order in Gaza, it is also cracking down on violent extremist groups. Pres. Obama, like all his predecessors, declines to move the US embassy in Israel to Jerusalem. A bitter argument has erupted over the appointment of Israel's UN ambassador. Patrick Seale agrees with other recent Arab commentaries that the Palestinians should call Netanyahu's bluff and return to negotiations with a strong stance. The Jordan Times denounces as strategically foolish Hamas' declaration that the 1947 UN partition resolution is null and void.