Mohammad Dahlan, who played a key backroom role in a major new effort for Palestinian unity, has said a two-state peace agreement with Israel was impossible and healing wounds from a civil war that split Palestine was now a priority.

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Once of the fiercest foes of Hamas, the Islamist group that seized the Gaza Strip in a civil war in 2007, Dahlan, a member of the rival mainstream Fatah party, was interviewed after a unity cabinet held its first meeting in the enclave in three years.

Dahlan said Israeli-Palestinian peace no longer within reach due to settlements (Photo: AP)

"The internal Palestinian situation is more sacred, is more important and is more useful now than the so-called negotiation," the veteran politician said of talks with Israel that collapsed in 2014 over issues such as Israeli settlement-building in the West Bank and Fatah-Hamas reconciliation.

A former peace negotiator with Israel who speaks Hebrew and who was born in a refugee camp, Dahlan, 56, noted Jewish settlement in the West Bank and East Jerusalem, areas captured in the Six Day War and which Palestinians seek along with Gaza for a future state.

"There is a complete Judaisation of the West Bank, not only of Jerusalem. It has become impossible for the two-state solution to be implemented, therefore, there is no political horizon," he said in the rare interview.

Egypt and Hamas

Relations eased on Monday, when Hamas handed over control of Gaza to a unity government. Although it agreed to the deal three years ago, the decision to implement it marks a striking reversal for Hamas, considered a terrorist group by Israel, the United States and most powerful Arab countries.

Palestinian PM Hamdallah (L) shakes hands with Hamas leader Haniyeh (Photo: Reuters)

Officials on both sides of the Palestinian divide and in other Arab countries say Dahlan, based since 2011 in the United Arab Emirates, was behind an influx of cash to prop up Gaza, and a detente between Hamas and Arab states including Egypt that led the group to dismantle its shadow government last month.

"It was an honor for us...that we succeeded to have those understandings between Hamas and Egypt," Dahlan said by telephone from Abu Dhabi. The former Gaza security chief said he had kept silent during mediation efforts but decided to speak out now that they have borne fruit.

Dahlan said Egypt, which has accused Hamas of aiding an Islamist insurgency in the Sinai Peninsula across the border from Gaza, held meetings with senior officials of the group, which denies aiding the militants.

A Hamas delegation to Egypt, without which Dahlan claimed no reconciliation would have been possible

Both sides agreed to shore up security along the border and prevent militants from crossing.

"Without reconciling with Hamas and without Hamas understanding the needs of the Egyptian national security there can be no serious (Palestinian) reconciliation, and no one but Egypt is capable of playing an effective role," Dahlan said.

Cairo will host Hamas and Fatah officials next Tuesday for further talks on power-sharing and the holding of Palestinian elections long-delayed by the internal rift.

A first sign of discontent surfaced with Hamas criticizing Abbas's decision to await the outcome of the talks before lifting sanctions he has imposed on Gaza.

'Good things on the way'

In the interview, Dahlan called on Hamas "to show more patience because all the good things are on the way" thanks to Egyptian mediation.

Dahlan accused Netanyahu of making Israeli-Palestinian peace no longer possible

He dismissed any notion that Egypt, with the UAE and Saudi Arabia, was pursuing Palestinian reconciliation as part of any wider US-initiated push for a regional peace deal with Israel.

"The chances of the so-called deal of the century is zero because (Prime Minister Benjamin) Netanyahu does not want peace and he imposed a reality of 700,000 settlers in the West Bank and in Jerusalem that made it impossible for the two-state solution to be implemented," Dahlan said.

Turning to Palestinian politics, Dahlan, who recently formed the "Fatah Reformist and Democratic Party" to challenge Abbas—now in the 12th year of a four-year term—accused him of committing "crimes and mistakes" but said he was ready to reconcile with the 82-year-old leader to reunite the Fatah movement.

Long serving PA President Abbas may have to run against Dahlan in elections (Photo: AFP)

"The ball is in his court and we are ready whenever he is," said Dahlan, in exile since 2011 after quarrelling with Abbas.

Ambitious and charismatic, he has long been suspected of harboring designs to succeed Abbas.

Dahlan said his strong ties with the UAE helped him raise hundreds of millions of dollars in aid for Palestinians in Gaza, the West Bank and East Jerusalem in the past 10 years.

A recent poll by the West Bank-based Palestinian Center for Policy and Survey showed that those who still support Fatah in Gaza are shifting loyalty to Dahlan. His popularity among Gazans has risen over the past nine months from nine to 23 percent.

Dahlan said he was not "obsessed" by opinion polls and a decision on whether he would run for a president would await until an election date is set.