East Jerusalem settlement revival casts doubt on peace talks

Israel yesterday cast a new shadow over prospects for a resumption of direct peace negotiations with the Palestinians when it disclosed fresh plans for 230 housing units in Arab East Jerusalem.

The move in effect ends an undeclared freeze on Jewish construction in East Jerusalem. The plans are the most significant of their kind in the city since the diplomatic row that blew up in March over approval of a major planned expansion of the Jewish Ramat Shlomo settlement during the visit of US Vice President Joe Biden.

It comes as Washington is trying to persuade the government of Prime Minister Benjamin Netanyahu to extend his moratorium on Jewish settlement construction in the West Bank in order to bring Palestinian President Mahmoud Abbas back into direct talks. The moratorium officially ended last month.

East Jerusalem was never officially included in that moratorium because Israel regards it as its own territory since it occupied it in the 1967 Six Day War. The international community, by contrast, has never accepted Israel's subsequent unilateral annexation of East Jerusalem, which the Palestinians want as their capital.

But Mr Netanyahu had restrained settlement building in East Jerusalem since the larger plan for 1,200 units in Ramat Shlomo infuriated the Obama administration and seriously embarrassed Mr Biden on his goodwill mission to Israel. The latest plan for new units in the Pisgat Ze'ev and Ramot settlements was among others announced across Israel itself by the Housing Ministry.

Saeb Erekat, the chief Palestinian negotiator, said: "This decision shows the position of the Israeli prime minister has not changed. He continues to take every possible step to prevent the establishment of a sovereign Palestinian state. By tendering in the occupied Palestinian territory, Netanyahu has again demonstrated why there are no negotiations today."

The new construction tenders came to light after a week in which Mr Netanyahu has already been seen as tacking to the right, for example by throwing his weight behind the highly contentious proposal of his hard-line nationalist foreign minister Avigdor Lieberman to require newly naturalised non-Jewish Israelis to pledge their loyalty to the country as "a Jewish state".

Western diplomats have expressed uncertainty over whether this was for his own ideological reasons or as a means of securing support from his coalition's right-wing flank before a possible agreement with the US to resume the West Bank settlement moratorium. Mr Abbas has insisted he will not re-enter direct talks without the moratorium being restored.

The US is widely believed to have made a substantial offer to Mr Netanyahu in return for a resumption of the moratorium – in effect a partial freeze. This is thought to include extra military hardware and possibly a measure of backing for Israel's determination to maintain a military presence in the Jordan Valley after the formation of any Palestinian state.

There have been unconfirmed Israeli media reports that Israel discussed the latest housing plans with Washington and had reduced the numbers of planned units in an effort to meet US sensitivities.

Kurt Hoyer, spokesman for the US embassy in Tel Aviv, said yesterday: "We are trying to discourage both sides from actions which appear to, or do, prejudge final status issues."

Mr Hoyer said such issues included the future of East Jerusalem and added: "We have been very clear about this."

Mr Netanyahu said this week he would be prepared to seek an extension of the moratorium if the Palestinians agreed to recognise Israel as a "Jewish state".

But Mr Abbas was quoted by Haaretz yesterday as telling Knesset members from the leftist Arab-Jewish party Hadash that would not happen.

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