ANALYSIS: East Jerusalem again at heart of Israeli-Palestinian row

By Ofira Koopmans Nov 18, 2009, 15:14 GMT

Jerusalem - Once again, Jerusalem stands at the heart of Israeli-Palestinian squabbling.

'This provides 900 more reasons why hopes for salvaging the two- state solution and restarting genuine negotiations are rapidly fading,' Chief Palestinian negotiator Saeb Erekat said Wednesday of Israel's plans to build 900 new housing units in Jerusalem.

Israel considers the southern neighbourhood of Gilo, abutting the Palestinian city of Bethlehem, as part of its 'eternal capital.'

It is one of several Jewish neighbourhoods of Jerusalem, which were built on occupied West Bank land, but within the city's municipal boundaries drawn up by Israel after it captured the territory along with East Jerusalem from Jordan in the 1967 Arab- Israeli war.

Israel has publicly refused international demands to stop construction in those areas, saying they are an integral part of the city.

The international community, however regards neighbourhoods built beyond the 'green line' separating the West Bank from Israel and East Jerusalem from West Jerusalem as settlements.

After threats by a frustrated Palestinian President Mahmoud Abbas to quit politics and thus far failed efforts to revive Israel- Palestinian peace talks, indications are that Washington is stepping up its rhetoric against unilateral steps that would prejudice the outcome of such talks.

'We are dismayed at the Jerusalem Planning Committee's decision to move forward on the approval process for the expansion of Gilo in Jerusalem,' White House spokesman Robert Gibbs said Tuesday.

'At a time when we are working to relaunch negotiations, these actions make it more difficult for our efforts to succeed.'

The condemnation has been echoed by the United Nations, Britain and France.

It is less than three weeks since US Secretary of State Hillary Rodham Clinton indicated that Washington could live with Israeli Prime Minister Benjamin Netanyahu's offer to temporarily stop all Israeli construction in the occupied territory, with the exception of East Jerusalem as well as under 3,000 housing units already in the pipelines elsewhere in the West Bank.

Sparking Arab anger, she called the offer 'unprecedented', even if it 'falls far short' of Washington's position.

But she was unable to convince Abbas to accept the offer and drop his demand for an absolute settlement freeze as a precondition for reviving the peace talks, broken off as Israel headed into new elections late last year.

The Israeli daily Yediot Ahronot reported Tuesday that US President Barack Obama's Middle East envoy, George Mitchell, had on Monday in Washington lobbied a Netanyahu aide to intervene and block the Gilo expansion.

But Netanyahu did not intervene in the municipal decision, prompting Washington to issue the strongly-worded condemnation.

Politicians across the Israeli political spectrum say that under any peace deal, Gilo and other Jerusalem neighbourhoods built on occupied West Bank land, along with key settlement blocs, should remain part of Israel. Previous governments have suggested a territorial exchange with the Palestinians as compensation.

Many in Israel argue that until such a deal is reached, construction in those areas must go on, as a matter of principle but also to tackle Jerusalem's housing needs. The city has little possibilities to expand westwards, where a green corridor with the highway to Tel Aviv is narrow, and is buttressed by the West Bank from the north, east and south.

Palestinians on the other had, feel bitterly cheated.

While Israel keeps building in settlement blocs choking in on the city from to the south and east, and in areas - such as Gilo - within the municipal boundaries in the north and south, the East Jerusalem area which they want as their future capital has all but no possibilities of expanding in any direction.

One political commentator wrote that the Obama administration does not accept the Israeli position and negotiations will not resume until Israel becomes 'convinced that the American mediator has truly changed the rules of the game.'

It is 'the moment of truth' for the Netanyahu government, he wrote in the country's biggest-selling daily, the Yediot Ahronot.