JERUSALEM – Israel on Sunday rejected a U.S. demand to suspend a planned housing project in east Jerusalem, threatening to further complicate an unusually tense standoff with its strongest ally over settlement construction.
Israeli officials said the country's ambassador to Washington, Michael Oren, was summoned to the State Department over the weekend and told that a project being developed by an American millionaire should not go ahead.
On Sunday, Prime Minister Benjamin Netanyahu told his Cabinet there would be no limits on Jewish construction anywhere in "unified Jerusalem."
"We cannot accept the fact that Jews wouldn't be entitled to live and buy anywhere in Jerusalem," Netanyahu declared, calling Israeli sovereignty over the entire city "indisputable."
The international community considers Jewish neighborhoods in east Jerusalem to be settlements and an obstacle to Israeli-Palestinian peacemaking. Israel does not regard them as settlements because it annexed east Jerusalem in 1967 after capturing it in June of that year.
East Jerusalem is an especially volatile issue because it is the site of key Jewish, Christian and Muslim holy sites. The Palestinians want the traditionally Arab sector of the city to be the capital of their future state.
"If the Israeli prime minister continues with settlement activities, he will undermine efforts to revive the peace process," Palestinian negotiator Saeb Erekat said.
According to Army Radio, the U.S. has demanded that planning approval for the project be revoked.
The approval, granted by the Jerusalem municipality earlier this month, allows for the construction of 20 apartments plus a three-level underground parking lot.
A spokesman for the U.S. Embassy had no immediate comment.
Settlements have emerged as a major sticking point in relations between Israel and Washington under the Obama administration.
The Palestinians have been encouraged by Washington's insistence that Israel freeze all settlement construction on lands in east Jerusalem and the West Bank that the Palestinians claim for a future state.
Nearly 300,000 Israelis live in West Bank settlements, in addition to about 180,000 Israelis living in Jewish neighborhoods in east Jerusalem.
The Palestinians say the Israeli presence makes it increasingly difficult to establish an independent state in these areas. They have refused to restart peace talks until Israel halts all settlement expansion, something the Israeli government has refused to do.
The east Jerusalem project is being developed by Irving Moskowitz, an influential supporter of Israeli settlement in east Jerusalem who purchased the Shepherd Hotel in 1985 and plans to tear it down and build apartments in its place.
The hotel is located near a government compound that includes several government ministries and the national police headquarters.