The United States has suspended its demand for Israel to renew a freeze on Jewish settlement building in the West Bank, throwing Palestinian-Israeli peace talks into deeper disarray.
The White House and the state department disclosed on Tuesday that weeks of efforts to broker a new settlement freeze and resuscitate the peace talks had gone nowhere.
"We have been pursuing a moratorium as a means to create conditions for a return to meaningful and sustained negotiations," Philip Crowley, the state department spokesman, told reporters in a televised press briefing in New York City.
"After a considerable effort, we have concluded that this does not create a firm basis to work towards our shared goal of a framework agreement," Crowley said.
Israeli settlement moratorium expired and the Palestinians refused to come back to the table.
Crowley promised continued efforts to try and unblock the Middle East peace process and said Israeli and Palestinian negotiators would visit Washington next week to work towards that end.
"We will have further conversations on the substance with the parties, and we will continue to try to find ways to create the kind of confidence that will eventually, we hope, allow them to engage directly," he said.
He indicated that the two sides would engage indirectly with each other rather than directly in talks brokered by US officials.
Al Jazeera's correspondent in Ramallah Nour Odeh said: "this was certainly a disappointment for the Palestinians who were expecting a formal answer from the Obama administration, about their efforts.
"They have known for some time through media reports about a lucrative deal that was offered by the Obama administration to Israel in exchange for a three month settlement freeze. So far none of these efforts have yielded any results," our correspondent said.
Mustafa Barghouti, a member of the Palestinian leglislative council, told Al Jazeera that the US decision meant the end of any peace talks.
"If the US, being the only country that is monopolising control of the talks, is failing to pressure Israel to abide by what was written in the road map and what the international community demands - which a complete freeze to settlement activities - then there is no peace process and the reason for this is Israel" he said.
"I don't think there is any value to more talks in Washington. Now they are talking again about proximity talks, this is a funny thing after having direct talks.
"It is like having an engagement party after the wedding. It doesn't make sense."
'Change in tactics'
Crowley's remarks suggest Palestinian-Israeli peace talks have returned to the point where they were in May when US envoy George Mitchell began shuttling between the two sides in so-called "proximity," or indirect negotiations.
Crowley said there "may well be a change in tactics" as the US still believes that there must "be some kind of direct negotiation" to make progress on the core issues.
The core issues are Israel's security, the borders of a future Palestinian state, the fate of Palestinian refugees and the status of the holy city of Jerusalem, which both sides claim as their capital.
At the high-profile relaunch of talks in September after a 20-month hiatus, Benyamin Netanyahu, the Israeli prime minister, and Mahmoud Abbas, the Palestinian president, both vowed to seek agreement on the core issues within a year.
The two leaders were supposed to meet every two weeks subsequently, but their direct talks ran aground at the end of September after the expiry of a 10-month Israeli ban on settlement building in the West Bank.
The Palestinians say they will not negotiate while Jewish settlers build on land they want for a future state. Abbas is insisting not only on a settlement freeze in the West Bank, but also in east Jerusalem, which Palestinians want for their capital.
In an attempt to revive direct talks, the US had offered Israel a package of incentives including 20 F-35 fighter planes, worth three billion dollars (2.3 bn euros), in exchange for a new three-month ban.
Washington also committed not to seek an additional freeze and pledged to provide Israel with diplomatic support, including vetoing anti-Israel resolutions at the UN.
The package would also have allowed Israel to continue building in east Jerusalem, over the objections of the Palestinians.