Palestinian leader Mahmoud Abbas reportedly left his Oval Office meeting with US President George W. Bush on Monday feeling "upset, alarmed and disappointed."

According to an Abbas aide who spoke to Reuters, Bush told the Palestinian leader that if either of them wants the establishment of a sovereign Palestinian Arab state by the end of the year, they will have to accept some of Israel's conditions and abandon the Arab world's all-or-nothing demands.

"We heard from the Americans that Israel would not accept the return of Palestinian refugees, Jerusalem would not be divided, and that Israel wants to annex settlement blocs. So in short, what we are being offered is much less than the 1967 borders," said the aide.

Bush remains determined to oversee a final status peace agreement before the end of his presidency, and Israeli Prime Minister Ehud Olmert has expressed his readiness to make that happen.

However, Olmert has had a tough time selling the division of Jerusalem and the surrender of Judea and Samaria to the Israeli public. Most Israelis look to the disaster that followed the full surrender of the Gaza Strip to Abbas, and feel that quitting Judea and Samaria could only lead to additional security hardships.

Despite its willingness to meet most of the Arab demands, the Olmert government has remained firm on Israel's refusal to accept a "right of return" to sovereign Israel for millions of foreign born Arabs who are the descendants of Palestinians that fled the area during the 1948 Middle East war.

Abbas has made the "right of return" a red line demand, but Israelis recognize that acquiescing would mean the demographic destruction of the Jewish state.