JERUSALEM, July 19 (JTA) — Observers from both sides of the divide were expecting little to emerge as Israeli and Palestinian officials held their highest- level meeting in months. As though the gloomy predictions were not enough, the talks held Sunday in Tel Aviv between Defense Minister Yitzhak Mordechai and Palestinian Authority Chairman Yasser Arafat’s deputy, Mahmoud Abbas, took place in the shadow of an attempted terror bombing in the heart of Jerusalem. Prime Minister Benjamin Netanyahu told his Cabinet before the negotiations began that he intends to reach an agreement with the Palestinians as soon as possible. But Palestinian officials charged that Netanyahu was using the talks as a pretext for postponing a further redeployment in the West Bank. Palestinian negotiator Nabil Sha’ath said Sunday that the talks had a “very, very limited chance of success.” The talks were held at the urging of the United States, which called on the two sides to resolve their differences regarding a U.S. proposal under which Israel would redeploy from an additional 13 percent of the West Bank and the Palestinians would take additional steps to crack down on terror. In an indication of what was at stake in the talks, U.S. Assistant Secretary of State Martin Indyk warned last Friday of an “explosive situation” if the talks fail. When Sunday’s more-than-three-hour session ended, Mordechai said the two sides had agreed to set up three negotiating teams, adding that he and Abbas would meet again this week. Just hours before Sunday’s talks began, Israeli police and firefighters prevented the detonation of an explosive-laden van near Zion Square. The van, driven by a Palestinian man, caught fire before the explosives could be detonated, according to Jerusalem Police Chief Yair Yitzhaki. Passers-by rescued the driver and called security officials, who discovered the explosives. Israeli officials blamed Hamas for the attempted bombing. A Hamas spokesman in the Gaza Strip said he had no knowledge of the planned attack. Arafat condemned the attack during a meeting with Israeli peace groups in the West Bank town of Ramallah. The van’s driver was identified as Jallal Rumaneh, a known Hamas activist in his early 30s. Rumaneh managed to enter the city despite a ban limiting his movement. Eight years ago, Rumaneh was sentenced to 20 months in prison for belonging to a “hostile organization.” Netanyahu refrained from blaming the attempted bombing on the Palestinian Authority. But at a news conference in Jerusalem, Netanyahu said the attempted attack proved that Israel had a strong basis for demanding that the Palestinian Authority intensify its war against terrorism — “so that territories which will be handed to them will not turn into terrorist bases.” Netanyahu, who said he was hopeful of reaching an agreement with the Palestinians, also hinted at a possible summit with Arafat. Arafat echoed the Israeli premier’s optimism. At the meeting with representatives of 22 Israeli peace groups, Arafat said he was confident that peace would eventually be achieved “because the people in Israel wanted so.” Immediately after the van’s explosives were discovered, Israeli security forces launched an intensive investigation into how the booby-trapped car was able to make its way into the heart of Jerusalem. Jerusalem police intensified security measures to prevent other potential sabotage attempts. A security alert was also announced in Tel Aviv. The Palestinian Authority is reportedly cooperating with Israel in the investigation of the case.