Israeli and Palestinian officials are cautiously optimistic about the upcoming of visit of Secretary of State Condoleezza Rice, due to arrive in the region on Sunday. But as Robert Berger reports from VOA's Jerusalem bureau, major obstacles stand in the way of a peace deal.

Secretary of State Rice will hold separate talks with Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas to prepare for an international peace conference in the United States later this year. She hopes to narrow the differences on a document on Palestinian statehood that would be presented at the conference.

Negotiators from both sides have been hammering out the document, and they are reporting progress. Palestinian negotiator Saeb Erekat says there are opportunities and dangers.

"I believe that this is a critical moment," he said.  "But failure to produce an agreement will change the dynamics of thinking within the Palestinian society also."

Erekat warned that such a failure would erode support for the peace process and drive Palestinians into the hands of the Islamic militant group Hamas. Hamas, which seeks Israel's destruction, seized control of the Gaza Strip in a civil war in June, routing the Fatah forces of Mr. Abbas, who now heads a U.S.-backed government in the West Bank.

Palestinian negotiators want commitments from Israel on key issues like the status of Jerusalem, Palestinian refugees and final borders. But Israel believes those thorny issues cannot be resolved in a short time and prefers a vague declaration of principles.

Israeli analyst Jonathan Spyer believes reports of progress are premature.

"The onus is on the U.S. administration which is pushing this process to explain exactly what this atmosphere of optimism which we're all kind of getting a sense of right now, is all about," he said.  "Is there really anything concrete in terms of concessions on such issues as the refugees? The answer is it's very hard to find any concrete evidence for that."

Both Israeli and Palestinian leaders are facing stiff opposition from hardliners. Hamas has warned President Abbas not to compromise, while right-wing Israeli parties are threatening to quit Mr. Olmert's government if his concessions go too far.