Israel settlement surge draws Rice criticism

RAMALLAH, West Bank (Reuters) - Secretary of State Condoleezza Rice called on Israel on Tuesday not to undermine peace talks with the Palestinians after a report found it had nearly doubled Jewish settlement construction.

On her seventh visit this year in a long-shot push for a peace deal by January, Rice said the two sides were "somewhat closer" in their talks despite deep public skepticism about the chances of ending the six-decade conflict.

Rice offered no further details, but said: "God willing, and with the goodwill of the parties and the tireless work of the parties, we have a good chance to succeed."

At a joint news conference in the West Bank city of Ramallah, Palestinian President Mahmoud Abbas described the Bush administration as "determined" to reach a peace deal this year and said he hoped the next U.S. president would "continue what we have started".

Israel's Peace Now group, citing data from the Central Bureau of Statistics, said construction had begun on more than 443 structures in settlements in the occupied West Bank since January compared with 240 starts in the same period in 2007.

"The settlement activity is not conducive to creating an environment for negotiations," Rice said. "Yet negotiations go on."

Earlier in Jerusalem, after talks with Israeli Foreign Minister Tzipi Livni, Rice said in reference to settlements that "anything that undermines confidence between the parties ought to be avoided".

Abbas described settlements as "the main obstacle" in the peace process.

ROAD MAP

Palestinians say settlement building denies them land they want for a contiguous state. A U.S.-backed peace "road map" calls on Israel to halt all settlement activity in the West Bank and for Palestinians to rein in militants.

Israel plans to keep building in settlement blocs that it wants to keep in any future peace deal with the Palestinians.

During her 25-hour visit, Rice made clear she still aims to reach a peace accord before U.S. President George W. Bush leaves office. But she played down chances of striking any partial accord in time for the September U.N. General Assembly.

"If this had been easy, somebody would have solved it a long time ago and it has fallen to us to try again to find a solution to the Palestinian-Israeli conflict," Rice said.

Few analysts believe Rice, who saw Israeli Prime Minister Ehud Olmert before meeting Livni, can secure a major breakthrough.

Progress towards a peace deal has been hampered by violence, Israeli settlement expansion and political uncertainty in Israel stemming from a corruption scandal that has forced Olmert to announce plans to step down.

Under a recent Olmert proposal, Israel would withdraw from some 92.7 percent of the occupied West Bank and all of the Gaza Strip, according to Western and Palestinian officials briefed on the negotiations.

Olmert proposed a 5.3 percent land swap, giving the Palestinians a desert territory adjacent to the Gaza Strip in exchange for West Bank land that Israel would keep.

Abbas rejected that because it would not provide for a contiguous Palestinian state with Jerusalem as its capital, a spokesman said.

At her news conference with Rice, Livni said Israeli settlement activity had been reduced "in the most dramatic way," especially in areas east of the barrier Israel is constructing in the West Bank.

(Writing by Jeffrey Heller and Arshad Mohammed;, editing by Giles Elgood)