It is an automomous decision of the Palestinians which we appreciate

Acting Israeli Foreign Minister Shlomo Ben Ami

But with a deal still proving elusive, the Palestinian Central Council (PCC) has agreed to Mr Arafat's request to put back the deadline, to give the peace process another chance to bear fruit. No new date has been set for declaring statehood.

The move staves off the threat of confrontation with Israel - which had threatened to annexe Palestinian areas of the West Bank if the declaration had gone ahead.

"It's a positive step that can enable us to proceed," said Israel's acting Foreign Minister, Shlomo Ben Ami, "but it is not a gesture that needs to be compensated."

Salim Zanoun said that delay does not remove Israeli obligations

Mr Ben Ami said the Palestinians' decision was "appreciated" by Israeli, although he said he did not regard it as a goodwill gesture.

The US has welcomed the move, which Washington called the right choice.

And the Russians - traditional allies of the Palestinians - also applauded the decision.

"It is satisfying that the PCC did not resort to unilateral measures, which could lead to negative consequences for the peace proces in the region," a Russian foreign ministry statement said.

A BBC correspondent says that the lack of international support, even from allies such as Russia, for an independence declaration, was a critical factor in the PCC's decision.

The PCC, which reached its decision after a two-day closed session, said preparations for statehood would continue despite the delay.

The Palestinian leadership remains committed to the choice of peace in order to achieve to goals of justice and self-determination

Salim Zanoun

Elections will be planned, along with the entry of a reborn state of Palestine into the United Nations.

PCC chairman Salim Zanoun said the body now expected a progress report on statehood by 15 November, the 12th anniversary of a symbolic declaration of a state-in-exile.

Obligations

The delay "does not mean that Israel is free from implementing its obligations" under previous agreements, said Mr Zanoun.

But "the Palestinian people and leadership remain committed to the choice of peace as a strategic choice in order to achieve the goals of justice and self-determination," he added.

No date has been set for the resumption of talks between Palestinian and Israeli negotiators.

However, a White House spokesman in Washington said discussions could be held in New York next week.

The two sides remain deadlocked over the future status of Jerusalem, the return of Palestinian refugees, and the final borders of a new Palestinian state.