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FACTBOX-Factors to watch as Israel, Palestinians near talks

May 8 (Reuters) - Stalled Palestinian-Israeli peace talks are set to reconvene indirectly, after the Palestine Liberation Organisation gave its approval on Saturday to a plan for U.S.-mediated negotiations with the Jewish state.

Here are factors that could affect the progress of negotiations:

* U.S. special envoy George Mitchell, who has led President Barack Obama's drive to revive peace talks stalled now for 18 months, will mediate the indirect talks, which are a far cry from direct negotiations held as far back as the early 1990s, but will at least get the peace process moving again.

* Mitchell is now in the region where he has been shuttling between the sides seeking to convene the so-called "proximity" talks. He is due to meet Palestinian President Mahmoud Abbas before leaving the region on Sunday, and officials say he may wrap up his visit with a formal statement about the talks.

* Israeli and Palestinian officials say that what has been agreed is that Mitchell, who is expected to return to the region this month, will shuttle between Israeli Prime Minister Benjamin Netanyahu and Abbas.

* Palestinians have demanded the talks address core conflict issues including Jerusalem and Jewish settlements built in occupied land Palestinians seek for a state. Israel has not ruled out any issues for discussion but has insisted they may only be resolved through direct talks.

* The peace process could be affected by tension elsewhere in the region. Israel hopes that hard-hitting international sanctions led by the United States will soon be imposed on Iran to compel it to open its nuclear project to inspection and prove it is not trying to develop atomic weapons. Any serious setback to the progress of a diplomatic solution would ramp up talk of military intervention, which could sideline peace efforts.

* The militant Islamist movements Hezbollah and Hamas, in Lebanon and Gaza, are Iranian-backed and could be enlisted as proxies by Tehran in the event of a conflict. For the moment, both fronts are quiet, but there are tensions beneath the surface. Israeli President Shimon Peres has accused Syria of supplying Hezbollah with Scud missiles -- an allegation denied by Damascus. Lebanon said Saturday it would not press Hezbollah to give up its arms citing tensions with Israel. The group's leader, Sayyed Hassan Nasrallah, has said he does not believe war is at hand. (Writing by Allyn Fisher-Ilan, Tom Perry and Douglas Hamilton; editing by