Republicans held out the possibility of a permanent end to the IRA's 30-year campaign of violence during the discussions with the Independent International Commission on Decommissioning, according to senior political sources.
But the scenario outlined by republicans was strictly conditional on the retention of the institutions on a fully functional basis, the full implementation of the Belfast Agreement and the wholehearted participation of the Ulster Unionists in the new political dispensation.
However, it is believed republicans were not prepared to take any definitive steps by the May 22nd deadline specified in the agreement, arguing that the clock should start ticking only from the time the institutions were established - in early December. Were this view to be accepted by the other parties to the agreement, it would mean rescheduling the aspirational target date for total decommissioning to December 2nd, 2001.
Nor were republicans prepared to contemplate anything which had connotations of surrender, or which meant following an agenda set by unionists.
But close observers believe a definitive end to the IRA's 30-year campaign - not just a ceasefire as at present but the eventual voluntary standing-down of an undefeated guerrilla army - was in prospect provided that the institutions worked successfully over an extended period, that the rest of the Belfast Agreement was being implemented, and that the republican grassroots were convinced that the political process was working and was no longer being stalled by the unionists.
The suspension of the institutions led the IRA to withdraw its interlocutor and, in the present climate of mistrust, observers warned it would be extremely difficult to persuade the organisation to return to the table.
Efforts to change the focus of debate from decommissioning to eventual demobilisation will be resisted by unionists, who have scored a major partisan victory with the suspension of the institutions and will not want to lose the political advantage.
Observers believe the current stalemate can be resolved only when the Ulster Unionists accept that a less confrontational approach is needed for dealing with the weapons issue, and when the IRA provides further clarification of its intentions.
The latest phase of direct rule in Northern Ireland can last as long as two years unless there is a determined initiative to break the deadlock, according to nationalist sources in the peace process.
While short-term prospects for political movement were seen as bleak, there was still some hope that the British Prime Minister or President Clinton would take steps to resolve the impasse.
Nationalist hopes rest on Mr Blair, rather than the Secretary of State, Mr Mandelson, who is regarded in a somewhat jaundiced light following the events of February 11th leading to the suspension of the new Northern Ireland institutions.
The nature of any initiative that Mr Blair and/or Mr Clinton could take was not immediately clear. The impending visit by the leaders of the Northern parties to Washington for the St Patrick's Day celebrations may open up political possibilities, as proved to be the case last year.
PA reports: The SDLP leader, Mr John Hume, said last night that the new institutions must be restored immediately if the current crisis was to be resolved. He added that he believed the IRA was still fully committed to peace.
He said he thought the IRA offer to the de Chastelain commission was good enough to have stopped Mr Mandelson putting the fledgling government on hold.