(Adds details, State Department comment) By Matt Spetalnick and Lesley Wroughton WASHINGTON, Jan 31 (Reuters) - The Obama administration hopes to complete a "framework" accord in coming weeks between Israel and the Palestinians and will then seek to negotiate a final peace deal by the end of 2014, the U.S. mediator told American Jewish leaders. Martin Indyk, the U.S. envoy seeking to defy widespread skepticism over the peace effort, said the framework would address core issues in the conflict, including borders, security, refugees and Jewish settlements, according to a participant in Thursday's briefing. However, it would remain vague on the future status of Jerusalem, the participant said. If both sides accept the preliminary terms, it would allow detailed talks to be extended beyond the original nine-month deadline - which expires on April 29 - and avoid the collapse of the U.S.-brokered peace initiative. Israeli Prime Minister Benjamin Netanyahu's coalition, which includes pro-settler parties, has already shown signs of strain over talks on Palestinian statehood. COMPENSATION State Department spokeswoman Jen Psaki acknowledged an "off-the-record briefing" had been given to American Jewish leaders but insisted "at no point did Ambassador Indyk make a prediction of the final contents of a framework". However, according to one participant and Israeli media reports on the leaks, among provisions under consideration is that 75 to 80 percent of Jewish settlers be allowed to remain in the West Bank as part of land swaps between Israel and the Palestinians. Despite that, a senior U.S. official said on Friday that "no determination" had been made about Jewish settlers. Also under discussion is not only the long-standing idea of compensating Palestinian refugees displaced by Israel's creation in 1948, but payments to Jews who were forced to leave their homes in Arab countries, the participant said. Such a move might win more support for a peace deal from the Israeli public. The framework would further call for the establishment of an Israeli security zone along the Jordan River in the West Bank - a key Israeli demand Palestinians are reluctant to grant - but would not specify how long the Israeli military presence would last, the source said. Both sides would be able to state their reservations to parts of the framework even as they proceed toward a permanent agreement. The participant said Indyk expressed hope that a framework could be completed in a "few weeks." But a senior U.S. official said there was "no expectation" it could be concluded that soon. With Israelis and Palestinians still strongly at odds on many key elements, Indyk offered no guarantee that such a preliminary accord could be clinched. There have been few signs of progress since Secretary of State John Kerry launched the U.S.-brokered peace effort last summer with a nine-month timeframe for a final deal. (Reporting By Matt Spetalnick; Editing by Sophie Hares)
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