Nov 21 (Reuters) - Below are answers to some questions about a breakdown in talks between the ruling Hamas Islamists and the once dominant Fatah over forming a Palestinian unity government.

Palestinians hope creation of a unity cabinet will prompt the West to ease sanctions imposed when Hamas took office in March because of the group's refusal to recognise Israel, renounce violence and abide by all existing peace deals with Israel.

WHAT IS THE LATEST?

Factions suspended negotiations on Monday after a row over the distribution of key ministries. Both sides blame each other for the breakdown. Prime Minister Ismail Haniyeh, a senior Hamas leader, said he wanted his group to retain the finance and interior ministry posts. Fatah wants independent "experts" to take them over. Hamas has also sought a share of appointments to Palestinian missions abroad and for governors in Palestinian cities, responsibilities held by President Mahmoud Abbas of Fatah. Agreement has been reached that a U.S.-trained academic, Mohammad Shbair, will replace Haniyeh as prime minister.

HAVE THE TALKS COLLAPSED?

Fatah is painting a more negative picture than Hamas, which insists talks have not failed. But no further high-level negotiations have been scheduled and Abbas left Gaza on Monday to visit Saudi Arabia. Some Abbas aides have begun saying Abbas has other "options", suggesting the president might make good on previous threats to sack the Hamas government or call a referendum to let the Palestinian people decide what to do.

OTHER OBSTACLES?

One question is the new government's position toward Israel. Previous attempts to form a unity government stalled over agreeing language for a platform that gives Hamas "wiggle room" on recognition of Israel but goes far enough to persuade the West to ease the embargo. Some Hamas officials have said the new government's platform might be vague to fudge the issue. Abbas aides say he will insist on a programme that explicitly endorses interim peace deals with Israel and a two-state solution to the conflict.

Other problems: Abbas wants an Israeli soldier captured by gunmen in a cross-border raid from Gaza in June released in exchange for Palestinian prisoners held in Israel before the government takes office. Hamas wants dozens of its lawmakers and several cabinet ministers, detained by Israel after the soldier's abduction, freed before forming the new government.

Hamas says talks on the Israeli soldier should not be linked to the unity government. Hamas also wants Abbas to offer explicit guarantees from the West that sanctions will be lifted as soon as the new government takes office.

ONE SCENARIO

Following months of intermittent negotiations and internal violence that had raised fears of civil war, the differences might prove too difficult to bridge. That could force Abbas to bring down the government as a way to lift sanctions, a move that would likely renew internal fighting. Analysts say Abbas's safest choice might be to order a referendum on early elections, something that would still be a political gamble.

WHERE DOES THIS LEAVE SANCTIONS?

Expect little change if the current government remains. Abbas' aides have said Israel, Europe and the United States had informed the president they would only lift sanctions after they were assured a new government had adopted a platform recognising Israel. While Washington wants the new government to explicitly meet international demands, the European Union has signalled it could settle for less. (Additional reporting by Wafa Amr in Ramallah and Nidal al-Mughrabi in Gaza)

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