WASHINGTON, Sept 26 (Reuters) - The Obama administration is "hopeful" the Israelis and Palestinians will compromise on the explosive West Bank settlements issue and avert a collapse of peace talks, a top White House adviser said on Sunday.
U.S. officials fear that if Israel allows a limited freeze on settlements in the occupied West Bank to expire later on Sunday, the Palestinians will carry through on a threat to abandon the direct talks launched this month with the backing of U.S. President Barack Obama.
David Axelrod, a close confidant of Obama, said the two sides were at the bargaining table and were working with U.S. Secretary of State Hillary Clinton and other U.S. officials to reach a deal on the issue.
"They are talking. They're trying to work this through, and we're hopeful that they will," Axelrod said on the ABC News show "This Week with Christiane Amanpour," describing the talks as "serious."
Axelrod added: "We think this (peace talks) is an unparalleled opportunity and a rare one, and we have to -- we have to seize the advantage of that, and we are going to urge and urge and push throughout this day to -- to get some kind of resolution."
Obama highlighted the importance of the peace talks in his speech to the United Nations General Assembly on Thursday and again urged Israeli Prime Minister Benjamin Netanyahu to extend the settlement freeze, a move the Israeli leader has resisted.
Netanyahu on Sunday urged Israeli settlers to act with restraint after the 10-month limited freeze on housing starts in the West Bank expired at 1800 EDT (2200 GMT), a plea that appeared aimed at keeping the talks alive. [ID:nLDE68P01P]
Israeli Defense Minister Ehud Barak said there was more than an even chance the peace process would continue. Washington has said it hopes all major issues in the peace talks can be resolved within a year.
Palestinian President Mahmoud Abbas, whom Netanyahu has publicly urged to remain in the negotiations, also appeared to indicate the talks would not be suspended immediately upon the moratorium's expiration.
More than 430,000 Jews live in well over 100 settlements established across the West Bank and East Jerusalem on land that Israel captured from Jordan in a 1967 Middle East war.
The World Court deems settlements illegal, although Israel disputes this.
Palestinians say the settlements will make it impossible for them to create a viable state and the issue is one of the core problems standing in the way of any peace deal. (Additional reporting by Jeffrey Heller in Jerusalem; writing by Paul Simao; editing by Mohammad Zargham)
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