JERUSALEM - A cloud of pessimism is suffocating hopes that U.S. President Barack Obama can pull off a miracle in the Middle East by setting negotiations on course for rapid progress toward a comprehensive peace agreement.

The New York encounter he arranged between Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas this week produced no more than a schedule of lower-level meetings this week and next, which has only deepened skepticism.

Here is a sample of fairly typical comments:

We're in a corner. Obama is running out of steam. He was expected to set the direction in the first six months. But now it's the politics of no choice, of deadlock, said Zakaria al Qaq, foreign affairs director at Al-Quds University.

Al Qaq and other commentators say Netanyahu seems content with the status quo, and in no hurry to open talks on a final settlement leading to the creation of a Palestinian state.

In Netanyahu's view, the threat of an atom bomb in the hands of the Islamic Republic of Iran is the top priority. In his own words: The Iranian issue overshadows everything.

Obama, Palestinian analysts note, has his hands tied by issues of greater immediacy for American voters -- healthcare policy and war in Afghanistan -- and cannot afford to open a new front with the right by taking on Israel in a test of wills.

He is captive of the healthcare issue and he cannot move freely, so the Palestinians are captive also, al Qaq said.

Abbas wants to allow Obama 3 or 4 months more to see what happens on healthcare. But what we are getting is meetings, not negotiations, and the people are not fooled.

Pessimism is not limited to the Palestinians.

Aaron David Miller, Mideast counsel to six U.S. secretaries of state, writes in Politico that to all but the terminally obtuse, the chances of a deal right now are about zero.

Even if Obama could deliver a freeze on Israeli settlement building in the West Bank that Abbas has again demanded and Netanyahu has again refused, Miller says, the fact remains that the Palestinian national movement is divided and Israel still doesn't know what price it's prepared to pay for peace.

Obama may soon have to decide whether to get out of the serious peacemaking business ... or get more deeply involved and consider an unprecedented American effort to bridge the gaps.

SOMETHING DRAMATIC

Palestinians put one positive gloss on New York's meeting, saying it proved Obama's personal commitment to securing a deal.

It is clear that Obama will not accept failure of his political investment in dealing with the Arab-Israeli conflict, columnist Talal Okal wrote it the newspaper al-Ayyam.

But domestic concerns including the continuing recession, Afghanistan and Iraq would severely limit his scope and it would not be Israel that would feel the impact, said Okal.

It's clear that the American administration is about to exercise certain pressures (and) it will be easier to put pressure on the weaker side i.e. the Palestinians.

American Jewish groups who advocate a critical approach to Israel over the interminable peace process were also downbeat.

There is a mood of resignation, of quiet despair that there is really (no) way out of the conflict, said Jeremy Ben-Ami, executive director of the pro-peace group J Street.

Ben-Ami said it would take more than incremental diplomatic business-as-usual, along well-trodden paths, to make any change. It needs something more assertive and more dramatic.

James Besser in New York-based Jewish Week wrote that when the late Yasser Arafat and the late Yitzhak Rabin shook hands on the White House lawn 16 years ago there was a sense among most mainstream Jewish leaders that the long Israel-Palestinian impasse could soon be broken.

Now there is a new consensus crystallizing that says that the status quo is about the best that can be hoped for.

The conflict has reached another impasse, according to Michael Goldfarb in the Weekly Standard.

Israel is fixed on Iran's perceived nuclear threat while Abbas and his Palestinian Authority cannot speak for the 1.5 million Palestinian of the Gaza Strip -- which is under the control of Islamist Hamas leaders opposed to recognizing Israel.

Obama is talking about having talks, and when talks do get underway, Hamas won't be at the table, and the Palestinian Authority will not be able to speak on their behalf.

Abbas can make no deals and offer no concessions without confronting Hamas first, and the Israelis can make no concessions without forcing some kind of confrontation with Iran first.

(Writing by Douglas Hamilton, editing by Jon Boyle)

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