Israel authorizes new settler homes in West Bank

JERUSALEM (Reuters) - Israel approved on Monday the building of 455 settler homes in the occupied West Bank, a move opposed by its U.S. ally and Palestinians but which could pave the way for a construction moratorium sought by Washington.

A Defense Ministry list of the first such building permits since Prime Minister Benjamin Netanyahu took office in March showed the homes would be erected in areas Israel says it intends to keep in a future peace deal with the Palestinians.

Palestinian chief negotiator Saeb Erekat said Israel's decision further undermined any belief that it was a credible partner for peace.

Israeli officials announced on Friday that Netanyahu intended to give the go-ahead for the new projects in the West Bank, drawing condemnation from the White House.

White House spokesman Robert Gibbs reiterated Washington's opposition to the move after Monday's announcement.

When asked if he had hoped last Friday's U.S. condemnation would head off such approval, he told reporters: "I think the decision had been made before that."

Some 500,000 Israelis live in the West Bank and Arab East Jerusalem, territory captured in a 1967 war. Palestinians say the settlements, deemed illegal by the World Court, could deny them a viable and contiguous state.

The permits, signed by Defense Minister Ehud Barak, for 455 housing units were widely seen in Israel as an attempt by Netanyahu to mollify pro-settler members of his government and Likud party before agreeing to a freeze of construction starts.

"This is a huge smokescreen," said Pinhas Wallerstein, a settler leader, suggesting the step was a token gesture meant to mask a real intention to bend to U.S. pressure to curb settlement expansion.

U.S. President Barack Obama, raising the prospect of steps by Arab countries to normalize relations with Israel, has pushed Netanyahu for a settlement freeze to open the way for a revival of Israeli-Palestinian peace talks suspended since December.

A senior Israeli government official said announcement of the building permits was a step toward a "package" deal that could include "very severe limitations in the growth of settlements -- a possible moratorium."

Keeping pressure on Netanyahu, right-wing lawmakers told hundreds of protesters gathered near the settlement of Maale Adumim that Israel should not allow close allies like the United States to force a settlement freeze.

"There are certain things we say to even close friends. We are an independent government and we will make the right decisions for the state of Israel," said cabinet minister Daniel Hershkowitz, whose Jewish Home party supports settler expansion.

"NATURAL GROWTH"

Netanyahu has resisted a complete moratorium, saying "natural growth" of settler families must be accommodated. Some 2,500 housing units are under construction in settlements and Israeli officials said those projects would continue.

Palestinian President Mahmoud Abbas has demanded a settlement freeze as a condition for returning to peace talks.

U.S. envoy George Mitchell is due back in the region later this week to try to finalize a settlement deal before a possible meeting at the U.N. General Assembly around September 23 involving the Israeli leader, Abbas and Obama.

In a statement, Abbas's top negotiator Erekat said: "Israel's decision to approve the construction of over 450 new settlement units nullifies any effect that a settlement freeze, when and if announced, will have."

It was not immediately clear when ground would be broken for the new homes. Yariv Oppenheimer of the anti-settlement movement Peace Now said that in the past it usually took up to a year before building began after permits were issued.

The Defense Ministry outlined the following construction plans: 149 homes in the settlement of Har Gilo, 12 in Alon Shvut, 84 in Modiin Ilit, 76 in Pisgat Zeev, 25 in Kedar, 20 in Maskiot and 89 in Maale Adumim.

Most of those settlements are near Jerusalem. The others are in the Jordan Valley to the east or close to central Israel.

(Additional reporting by Allyn Fisher-Ilan, Ori Lewis and Matt Spetalnick; editing by Diana Abdallah)