Israeli minister plugs for settlement expansion

JERUSALEM (Reuters) - A key political ally of Prime Minister Benjamin Netanyahu said Monday that Israel must go ahead with plans to expand a Jewish settlement enclave in occupied land despite U.S. objections.

The remarks by Interior Minister Eli Yishai of the religious Shas party illustrated the pressure Netanyahu faces from his right-wing coalition partners to resist Washington's calls to freeze settlement construction in the occupied West Bank.

"You cannot tell us we must not build within the settlement blocs," said Yishai, whose party holds a pivotal number of seats in Netanyahu's four-month-old coalition, on a visit to a West Bank settlement.

His comments were broadcast by Israel Radio.

Yishai said he hoped Israel would persuade U.S. President Barack Obama that expanding settlements near Jerusalem, that Israel seeks to keep under any future peace deal, was vital for "security, national interests and is just and necessary."

Yishai was visiting a hilltop known as Area E, which Israel seeks to build on to create territorial contiguity between a larger neighboring settlement, Maaleh Adumim, and Jerusalem.

Palestinians fear the project Israel has planned for Area E would isolate them from East Jerusalem which they want as capital of a future state.

Western-backed Palestinian President Mahmoud Abbas has said all settlement activity must cease before peace talks stalled since December may resume.

Israel captured East Jerusalem in a 1967 along with the West Bank and annexed the city as part of its capital in a move never recognized internationally.

Shas holds 11 seats in Netanyahu's 74-member coalition in a parliament of 120. While the party has not suggested it would quit over the settlement issue, Yishai is one of many coalition allies to voice objections to halting the construction.

Israeli Parliament Speaker Reuven Rivlin, a member of Netanyahu's right-wing Likud party, said alongside Yishai "there would be no peace" unless Israel built in the Area E zone to link up the settlements in that area with Jerusalem.

The settlement issue has opened a rift in Israeli-U.S. relations and Obama has sought through his envoy to the region, George Mitchell, to negotiate at least a temporary halt to the construction.

(Writing by Allyn Fisher-Ilan; Editing by Jon Boyle)