On the night before Israeli-Palestinian peace efforts collapsed over the new Fatah-Hamas unity pact, Israel offered the Palestinians a package of incentives to extend the talks, including permission to begin wide-scale construction projects in West Bank areas that are under Israeli control.

Israel’s unprecedented readiness to sanction considerable Palestinian building in “Area C” parts of the West Bank — where Israel maintains overall control — was made clear during talks on Tuesday night between Israeli negotiators Tzipi Livni and Yitzhak Molcho and their Palestinian counterparts Saeb Erekat and PA intelligence chief Majd Freij, The Times of Israel was told Friday.

The offer was part of a wider package discussed by the sides as they worked to agree on terms for peace talks to continue beyond the April 29 deadline. The Israeli negotiators also reiterated Jerusalem’s readiness to agree to a significant prisoner release and a partial freeze on building in West Bank settlements.

Palestinian sources said Friday that the two sides agreed to discuss the construction offer further in the next session of their talks, which was tentatively set for Wednesday evening or Thursday morning. However, on Wednesday afternoon, Palestinian Authority President Mahmoud Abbas’s Fatah faction and the Islamic extremist Hamas group announced in Gaza that they had reached a unity agreement providing for the establishment of a new Palestinian government in five weeks and subsequent Palestinian elections. Israel responded first by cancelling the next Erekat-Livni meeting, and then by suspending all further peace talks so long as the Palestinian reconciliation process continues. On Thursday night, Livni slammed Abbas for making a series of “bad decisions,” including agreeing to a partnership with the “terrorist” Hamas that left Israel no choice but to suspend talks.

The Israeli offer to sanction large-scale Palestinian construction in Area C had not previously been presented in the talks, and Palestinian sources said they had intended to discuss it further. They also said that the Palestinian negotiators on Tuesday reiterated their demand, as a condition for extending the peace process, for a complete settlement freeze and an intensive three-month negotiating focus on resolving the borders of a Palestinian state.

An Israeli TV report on Thursday night said Prime Minister Benjamin Netanyahu was indeed ready to begin final border discussions. The prime minister did not intend to present a final border proposal, but rather had planned to present to the Palestinians, via the Israeli negotiating team, a map that would have served as a starting point for comprehensive final border discussions, according to the Channel 10 report, which did not cite a source for the claim. In addition, Netanyahu was prepared to halt new construction in the settlements, but insisted that building continue for projects already underway, the report said.

General Abdel-Fattah el-Sissi (photo credit: AP/Jim Watson, Pool)

General Abdel-Fattah el-Sissi (photo credit: AP/Jim Watson, Pool)

Egyptian sources told The Times of Israel on Friday, meanwhile, that leading presidential candidate Abdel-Fattah el-Sissi and the regime in Cairo knew in advance about the Fatah-Hamas agreement. Abbas personally briefed el-Sissi on the Fatah-Hamas contacts when they met two weeks ago in Cairo. By contrast, both the Israeli and the American governments appear to have been blindsided by a move that Israel denounced and the US called “disappointing.”

To enable the negotiations that led to the deal, Cairo allowed Moussa Abu Marzouk, the deputy head of the Hamas political bureau, to cross from Egypt into Gaza. Talks between Abu Marzouk and senior Fatah official Azzam al-Ahmad also took place in Cairo, hosted by Egypt’s intelligence apparatus.

Some Egyptian sources on Friday expressed shock at Israel’s bitter response to the unity pact, arguing that the deal meant that Hamas was accepting longstanding Israeli and international demands regarding recognition of Israel, and that the intended new Palestinian government, responsible for the West Bank and Gaza, would be controlled overall by Abbas, precisely as Israel has long demanded.

Gavriel Fiske and Times of Israel staff contributed to this report.