(Repeats story from Thursday without changes)
* Israelis, Palestinians at odds over process
* Major issues dividing them not even in focus
* Once hopeful Kerry looking increasingly glum
By Crispian Balmer and Lesley Wroughton
JERUSALEM, April 3 (Reuters) - From the moment Middle East peace talks resumed last July, it always looked as if U.S. Secretary of State John Kerry was more eager to strike a deal than either the Israelis or Palestinians.
While the two old foes have said repeatedly that they want to talk, neither side has looked remotely ready to make the sort of concessions that might eventually lead to peace.
When the U.S.-led negotiations hit major turbulence this week, it was not about core issues that have fuelled the decades-old conflict. Instead, the dispute focused on how to maintain the arid discussions and avoid being blamed for failure.
Kerry, who kicked off this latest pursuit of peace eight months ago with typical enthusiasm, has indicated that he will play a less prominent role should the process continue, revealing in recent days his growing frustrations.
"In the end, my friends, as all of you know, you can push, you can nudge, but the parties themselves have to make fundamental decisions and compromises. The leaders have to lead," he said during a visit to Algiers on Thursday.
The latest crisis started last weekend when the Israelis failed to fulfil their commitment to release a batch of 26 Palestinian prisoners, saying they first needed guarantees that talks would continue beyond an initial April deadline.
Kerry, who has visited the region more than a dozen times in just over a year, dropped everything and flew for one night to Jerusalem to try to find a way forward towards the seemingly elusive goal of securing a sovereign Palestinian state.
Believing a convoluted, three-way deal was in the offing, both Kerry and Israel were stunned the following day when Palestinian President Mahmoud Abbas theatrically signed 15 international treaties live on television.
While none of the conventions directly threatened Israel, Abbas was clearly indicating that he was ready if necessary to launch the Palestinians into an array of global organisations from where they could harass Israel.
YAWNING DIVIDE
A hangdog Kerry cancelled a return trip to the region planned for Wednesday and at a subsequent news conference told reporters that U.S. facilitation was "only as good as the willingness of leaders to actually make decisions".
A U.S. official said the unexpected jolt from Abbas actually succeeded in bringing the Israelis and Palestinians back to face-to-face discussions for the first time since last November -- albeit in a stormy session, according to Palestinian media.
From the very beginning, the two sides have accused each other of failing to take the process seriously.
"We are not here to play games because this is an issue of our survival," said Hanan Ashrawi, a senior official in the Palestine Liberation Organization (PLO).
"In history they will not find anyone as flexible and willing to make Kerry's mission succeed as President Abu Mazen," she told Reuters, referring to Abbas.
A glum Israeli minister saw it very differently.
"I am looking at the way the Palestinians behave and I ask myself if they really want a state," the minister said this week, declining to be named because of the sensitive timing.
"What they are saying is if we don't get 100 percent of what we want then we don't want it at all. We, a right-wing Israeli government, are offering 90 percent of what they want. If they really wanted a state, they would say yes."
Palestinians argue that they made their great concession in 1993 when they agreed that their own state should be built on territory seized by Israel in the 1967 war - land that represents just 22 percent of British-mandate Palestine.
Yaakov Amidror, who served as Prime Minister Benjamin Netanyahu's national security adviser until November 2013, said last month that the world had not recognised the concessions that Israel had been willing to make.
While condemning the Palestinians for not making a "single concession", he also said he understood their dilemma.
"There is no other case in history where a people return to their land after 2,000 years, claiming ownership over it while knowing that an indigenous people is living there," he told a conference organised by the Begin-Sadat Centre for Strategic Studies at Bar-Ilan University.
HATRED
Kerry has openly acknowledged that distrust and even hatred run deep. In his eagerness to overcome the recent impasse, his office suggested that the United States might free Israeli spy Jonathan Pollard from jail in return for Israeli concessions.
This would represent a triumph for Netanyahu, who has long championed the cause of Pollard. But his release would not bring a full peace deal any closer or address any relevant issue.
"The fight right now, the disagreement, is not over the fundamental substance of a final status agreement, it is over the process that would get you there," Kerry said.
The two enemies carefully choreograph their actions and statements, anxious not to be blamed for failure, which would further dent Washington's foreign policy record in the region.
They also have until April 29 to overcome their latest spat and reach an agreement on how to carry the process forward -- something officials in both camps think is still a possibility.
It serves Netanyahu's purpose to maintain the status quo provided by the talks. Abbas, on the other hand, wants to safeguard U.S. aid donations and would see his domestic image boosted if he could orchestrate a further prisoner release.
But neither the Israeli or Palestinian public seems to believe that the negotiations will lead anywhere, with growing voices calling for Kerry to pull down the curtain.
"Go home, Mr Kerry, go home," left-leaning Israeli daily Haaretz said in a front page headline on Thursday.
"Only American disengagement from the peace process could provide the shock treatment the Israelis and Palestinians need." (Editing by Giles Elgood)
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