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, AP reported. 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 in the disputed section of the holy city should not go ahead. Settlements built on captured lands claimed by the Palestinians have emerged as a major sticking point in relations between Israel and the Obama administration because of their potential to disrupt Mideast peacemaking. Although Prime Minister Benjamin Netanyahu recently yielded to heavy U.S. pressure to endorse the establishment of a Palestinian state, he has resisted American demands for an immediate freeze on settlement expansion. On Sunday, Netanyahu told his Cabinet there would be no limits on Jewish construction anywhere in «unified Jerusalem.» The international community considers Jewish neighborhoods in east Jerusalem to be settlements and an obstacle to Israeli-Palestinian peacemaking because they complicate a possible division of the city between Israelis and Palestinians. 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.
