JERUSALEM, Israel (AP) — In laying out some of the parameters for an Israeli-Palestinian peace deal, President Barack Obama is presenting the Israeli and Palestinian leaders with tricky and fateful choices.

Obama said the basis for border talks between the two must be Israel’s frontier before it captured the West Bank, Gaza and east Jerusalem in the 1967 Mideast War.

It’s something Palestinian President Mahmoud Abbas has been waiting to hear from Obama for more than two years. Abbas must now decide whether these assurances are enough for him to drop plans to ask the UN General Assembly in September to recognise a Palestinian state in the territories occupied in 1967, and instead return to negotiations with Israel.

However, Israeli Prime Minister Benjamin Netanyahu signalled after his meeting with Obama Friday in Washington that he is not prepared to consider the US president’s proposals, calling the 1967 borders “indefensible”.

There is another big hurdle en route to the resumption of peace talks that Obama clearly wants — Abbas’ reconciliation with his bitter rival, Hamas. Considered a terror group by the US and Israel, the Islamic militant group has given no indication that it is willing to moderate as it forms a possible unity government with Abbas’ Fatah movement.

Obama has asked the Palestinians for a “credible answer” to that problem.

Abbas says he and not the Palestinian Government will be negotiating — and there is a sense that such a finessing would be acceptable to the world community if Netanyahu would go along. However, Netanyahu said Friday that Abbas would have to choose between Hamas and peace talks.

Abbas consulted by phone with several Arab foreign ministers, and planned to meet Saturday in Jordan with King Abdullah II, before responding to Obama’s parameters, said Palestinian negotiator Saeb Erekat. After his return to the West Bank, he will meet with PLO and Fatah leaders in coming days, Erekat said.

Erekat said it’s too early to say whether the Palestinians will now drop their UN recognition bid. He said Netanyahu’s comments amounted to a “total rejection of the Obama vision and speech”.

Another senior Abbas aide, Nabil Shaath, said the Palestinians would move forward with the quest for UN recognition, but it was not clear whether he spoke for Abbas or expressed a personal view.

A US official, speaking on condition of anonymity in exchange for discussing sensitive negotiations, said Obama’s formulation in a speech last Thursday, endorsing the pre-1967 cease-fire line, was presented in the hopes of dissuading the Palestinians from going ahead with their UN plan.

The president said the 1967 frontier should serve as a baseline, but allowed for mutually agreed land swaps.

It differed from previous US positions in nuance — but important nuance.

“The US is now formally on record, in no uncertain terms, advocating an initial deal based on the 1967 lines, with land swaps, and agreed security provisions,” said Scott Lasensky, an analyst with the US Institute of Peace. “The administration had danced around that formulation for some time, but typically had framed it as an aspiration of the parties — rather than US policy.”

For example, Secretary of State Hillary Rodham Clinton recently called for talks on a deal that “reconciles the Palestinian goal of an independent and viable state based on the 1967 lines, with agreed swaps”, with Israel’s demands.

Netanyahu has said he wanted Obama to reaffirm commitments made by President George W Bush in a 2004 letter to then-Israeli premier Ariel Sharon. Referring to Israel’s settlements, Bush wrote that “in light of new realities on the ground … it is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949” — a term synonymous with the pre-1967 borders.

The Obama administration has said it did not consider that letter binding.

The question has been around ever since the 1967 Middle East war. A few months later Security Council Resolution 242 called for “withdrawal of Israeli armed forces from territories occupied in the recent conflict”, avoiding use of “the territories” and leaving the sides to debate whether this meant Israel could keep some areas.

In 2000, then-US President Bill Clinton laid out parameters for a peace deal, proposing that the Palestinians keep all of Gaza and up to 96 per cent of the West Bank, while Israel would annex areas where it has settled Jews in east Jerusalem and some Jewish settlements in the West Bank. The Palestinians would be compensated in a land swap. That never led to agreement.

Netanyahu’s predecessor, Ehud Olmert, sought to annex 6.5 per cent of the West Bank to Israel, and offered an equal amount of Israeli land in exchange. Abbas said he was ready to swap no more than 1.9 per cent, which means the vast majority of settlements would have to go. Those talks broke off in 2008 as well.

For Netanyahu, as head of the right-wing Likud, it is a major leap that he is willing to state, as he did in Israel’s Parliament on Monday, that he would acquiesce to a Palestinian state.

But the Israeli leader still rejects a division of Jerusalem, wants to keep troops along the Jordan River on the Palestinian state’s eastern flank, and wants to retain major blocs of Jewish settlements.

Abbas repeatedly has asked Obama to present his own outlines for a final deal. Having lost faith in negotiations, the Palestinians have turned to a different plan: Going to the General Assembly for recognition in September.

But that is a problematic gambit, because it takes the Security Council to set membership in motion, and the Palestinians face a likely US veto there. The General Assembly can only recommend; although the Palestinians have a near-certain majority there, the outcome promises to be messy and there are some concerns about how Palestinians will react after all the build-up perhaps yields little change on the ground.

In his speech, Obama did not specifically call on Israel to halt settlement construction. He also said Israel must be “the homeland for the Jewish people”, which suggests a precluding of any Palestinian demands for a “right of return” of large numbers of Palestinian refugees and descendants.

But he did not ask the Palestinians to drop that demand, as the Israelis would have liked.

Bassem Zbeidy, a Palestinian analyst, said the speech did not meet Palestinian expectations — and added that he was concerned that Obama criticised the Palestinians’ planned UN bid and Abbas’ recent reconciliation agreement with Hamas.