Israeli Cabinet Considers U.S. Settlement Proposal

JERUSALEM -- Israel's prime minister briefed his Cabinet Sunday on a package of security and diplomatic incentives the U.S. has proposed to entice Israel to renew limits on settlement construction and revive moribund peace talks with the Palestinians.

The Palestinians expressed strong reservations about the proposal because the 90-day moratorium on new construction would apply only to the West Bank, not east Jerusalem, the Palestinians' hoped-for capital. Still, they did not reject it outright, saying they would consult among themselves and with Arab leaders.

Israeli Prime Minister Benjamin Netanyahu said at the start of the Cabinet meeting that details of the proposed deal were still being finalized by Israeli and U.S. teams. He said when the proposal was complete, he would bring it before an inner Cabinet of decision-makers.

"Every proposal will consider the security needs of the state of Israel, both immediate needs and threats in the coming decade," he said.

Peace talks ground to a halt, just three weeks after they began at the White House, after Israel resisted U.S. and Palestinian pressure to extend a 10-month moratorium on new construction in the West Bank that expired Sept. 26. The Palestinians refused to return to the negotiating table if construction resumed on land they want for a future state and gave the U.S. until later this month to come up with a formula to salvage the talks.

The diplomatic climate soured even further last week after Israel pressed ahead with plans to build 1,300 apartments in east Jerusalem.

Last week, Netanyahu met with U.S. officials in an effort to break the impasse and held a seven-hour meeting with U.S. Secretary of State Hillary Rodham Clinton. After he returned, an Israeli official disclosed that in exchange for a reinstated moratorium, the White House would ask Congress to supply Israel with 20 stealth fighter jets worth $3 billion. It also would commit to fight international resolutions critical of Israel or steps to unilaterally advance the Palestinian quest for statehood, the official said.

He spoke on condition of anonymity pending the presentation of the deal to the Cabinet on Sunday.

Under the proposal, the U.S. has agreed not to seek a further extension of the building moratorium after it expires. The idea is that the 90-day period would give the two sides time to work out an agreement on borders between Israel and a future Palestinian state, thereby making it clear where Israel can continue to build and where it cannot.

The likelihood of achieving that goal is far from assured.

The Palestinians want to establish a state in east Jerusalem, the West Bank and the Gaza Strip, all captured by Israel in the 1967 Mideast war. Israel has withdrawn from Gaza, but about half a million Israelis have settled in the other areas.

There are signs the Palestinians will agree to land swaps enabling settlements very close to the Israeli border to become a part of the Jewish state. But previous rounds of negotiations under more dovish leaders failed to nail down a border agreement, and Palestinians said Netanyahu resisted a discussion of borders in the September talks.

Netanyahu can also expect stiff opposition to the U.S. proposal from some members of his inner Cabinet who take a hard line against territorial concessions to the Palestinians.

"If we freeze (construction) for three months, the pressure on us to decide our permanent borders will be unbearable," said Cabinet minister Silvan Shalom, a member of Netanyahu's ruling Likud Party and the inner Cabinet. "Unfortunately, if that happens, it will be a huge mistake," he added, speaking on Israel Radio.

Erekat, the Palestinian negotiator, said the Americans had not officially informed the Palestinians about the details of the proposal, but "they know we have a major problem in not including east Jerusalem."

Palestinian President Mahmoud Abbas will put the U.S. plan before Palestinian decision-makers and call for an immediate session of Arab League officials before announcing an official decision, Erekat said.

The Palestinians have said that if negotiations fail they will consider sidestepping Israel and seek U.N. recognition of a Palestinian state.

According to the Israeli diplomatic source, the building freeze would apply to all new construction that began in the West Bank after the moratorium expired on Sept. 26. Anti-settlement watchdog Peace Now reported Sunday that construction has begun on 1,649 apartments.

That number includes 1,126 apartments where foundations have been dug -- the government's definition of a housing start. In all of 2009, there were 1,888 housing starts in the West Bank.

Settler leader Dani Dayan denied that so much construction had taken place, saying Peace Now's numbers were "far from the truth." But he didn't offer different figures.

It was not clear whether the extended moratorium would apply to some 3,000 apartments whose construction was already under way when the original limits were imposed a year ago and continued throughout.