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Obama leads world chorus against Israel plan for Jerusalem

World powers led by US President Barack Obama today criticised Israel's decision to build 1,300 new settler homes in east Jerusalem, warning it risked wrecking an already frail peace process with the Palestinians.

"This kind of activity is never helpful when it comes to peace negotiations," Obama told reporters during a trip to Indonesia.

"I'm concerned that we're not seeing each side make the extra effort to get a breakthrough that could finally create a framework for a secure Israel living side-by-side in peace with a sovereign Palestine," the US leader said.

But he said he would continue working on the process despite the deepening impasse.

"We're going to keep on working it though because it is in the world's interests," he said.

"It is in the interests of the people of Israel and it is in the interests of the Palestinian people to achieve that settlement.

The foreign ministry in Russia, a member of the Middle East peace Quartet along with the United States, United Nations and European Union, said: "Moscow treats this decision with the most serious concern.

"We find it essential that the Israeli party refrained from the declared construction and on the whole kept to a moratorium on settler activity on the west bank of the Jordan river and in east Jerusalem."

Israel's decision on Monday to approve the new homes in annexed east Jerusalem sparked a furious reaction from the Palestinians, who accused Israeli Prime Minister Benjamin Netanyahu of being determined to sabotage peace talks.

Chief Palestinian negotiator Saeb Erakat on Tuesday called on the international community to move toward recognition of a Palestinian state in response to the Israeli defiance.

"Israel's latest announcement of more settlement construction further threatens the already stagnated negotiations process," he said in a statement.

"This latest unilateral Israeli act necessitates dramatic international action for immediate recognition of the Palestinian state (based) on the June 4, 1967 borders," he said.

"Once more, ... Prime Minister Netanyahu ... has sent Palestinians and the US administration a clear message that Israel chooses settlements, not peace," Erakat charged.

"Israel is acting as a state above the law, and the international community must react."

Netanyahu, on a visit to the United States, the main broker of the peace process, urged Palestinians to return to the negotiating table, warning that the Jewish state would not yield to international dictates.

EU chief diplomat Catherine Ashton joined the calls for Israel to drop the settlement plans in Jerusalem's mainly Arab sector, warning its decision clashed with efforts to revive peace talks with the Palestinians.

"Catherine Ashton is extremely concerned by the announcement by Israel of a plan for the construction of 1,300 new housing units in east Jerusalem," her office said.

"This plan contradicts the efforts by the international community to resume direct negotiations and the decision should be reversed."

Direct talks resumed in early September but quickly ran aground when an Israeli moratorium on West Bank settlement construction expired later that month, prompting the Palestinians to freeze talks until Israel reimposes the ban.

The US State Department said Secretary of State Hillary Clinton would address the issue of east Jerusalem settlements when she meets Netanyahu in New York on Thursday.

The United States is "deeply disappointed by the announcement of advanced planning for new housing units in sensitive areas of east Jerusalem" and Clinton will raise the topic, State Department spokesman Philip Crowley said.

Netanyahu also hit a barrage of UN criticism.

United Nations chief Ban Ki-moon expressed concern to Netanyahu in a meeting at the organisation's headquarters in New York.

Ban "expressed concern at the resumption of the settlement activity and recent announcements of further settlement construction in east Jerusalem," a UN spokesman said.

"The secretary general emphasised that it was vital to break the current diplomatic stalemate, resume negotiations and produce results."

Israel seized east Jerusalem, along with the West Bank and Gaza, in the 1967 Middle East war. The Jewish state annexed the eastern sector as part of its unified capital, in a move not recognised by the international community.

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