Olmert backs off from West Bank pull-out with settlements plan

The government of the Israeli Prime Minister Ehud Olmert has issued bids to build 700 homes in the West Bank - its largest settlement construction project since taking office in May.

The construction and housing ministry published adverts in Israeli newspapers requesting proposals for the new construction in the Maaleh Adumim and Betar Illit settlements, both outside Jerusalem.

Kobi Bleich, a ministry spokesman, confirmed that the project was the largest so far by the new government, which was elected on a platform calling for withdrawal from most Jewish settlements. Previously, the government issued bids to build 98 homes in other projects.

Despite his calls for a withdrawal, Mr Olmert has repeatedly said Israel would keep major settlement blocs - including Maaleh Adumim and Betar Illit - under any final peace deal with the Palestinians. In all, more than 60,000 people live in the two settlements.

Mr Olmert said he had put on hold his plan for a pull-out from parts of the occupied West Bank following the recent conflict in Lebanon. "I have no doubt that something has changed in the order of priorities I had believed to be correct," he told parliament's foreign affairs and defence committee, according to an official who briefs reporters on its proceedings.

"At this moment, the issue of the realignment is not in the order of priorities as it was two months ago," Mr Olmert said in his first appearance before the panel since 34 days of fighting with the Lebanese Hizbollah group ended in a ceasefire on 14 August.

Since the end of the war in Lebanon, Mr Olmert has frozen his withdrawal plan - leaving the future of Jewish settlements throughout the West Bank up in the air. The Palestinians claim all of the West Bank, which Israel captured in the 1967 Six-Day War, as part of a future state.

Saeb Erekat, a confidant of the Palestinian President Mahmoud Abbas, condemned the planned settlement expansion. "This undermines all efforts being exerted to revive a peace process," he said.

"And at the end of the day, the choice will be between settlements or peace. You cannot have both."

The US and other foreign governments do not recognise the settlements, and consider settlement construction an obstacle to peace in the Middle East. However, President George Bush has signalled that he would agree to Israel holding on to some settlements under a peace agreement.

Stewart Tuttle, a US embassy spokesman, said any final borders should be reached through agreement. "The US position hasn't changed: the Israeli government shouldn't expand the settlements," he said. "The US position is that the borders between Israel and a future Palestinian state should be negotiated."

Mr Bleich said that the expansions in Maaleh Adumim and Betar Illit had been on the drawing board for more than 10 years, and received the requisite approvals from the defence ministry several months ago. He estimated the 342 units in Betar Illit and 348 units in Maaleh Adumim project could be built within three years.

The Peace Now group, which advocates the dismantling of settlements, said it expected the Olmert government to freeze settlement expansion, as it promised to do when it accepted the American-backed "road map" peace plan more than three years ago.