ISRAELI PRIME minister Binyamin Netanyahu yesterday rejected American calls to halt Jewish construction in Arab east Jerusalem, stressing that Israeli sovereignty over Jerusalem was not up for discussion.
His comments at the weekly Israeli cabinet meeting came after Israel's ambassador to Washington, Michael Oren, was summoned to the state department and told that the Obama administration opposed Israeli plans to build at the site of the historic Shepherd's hotel in the capital's Sheikh Jarrah neighbourhood.
The latest dispute between Washington and Jerusalem follows months of tension over the American demand that Israel stop all building on West Bank Jewish settlements.
Contacts between the sides continue, but so far no compromise has been reached.
Mr Netanyahu told ministers that Jerusalem is the unified capital of Israel, and just as Arabs can purchase buildings in the western, Jewish areas, there is no ban on Jews buying or building apartments in the Arab, eastern part of the city.
"This is the policy of an open city, an undivided city that has no separation according to religion or national affiliation," he stressed.
State department officials intervened following warnings from Palestinian president Mahmoud Abbas that Israeli construction in the Sheikh Jarrah neighbourhood would alter the demographic balance in Israel's capital.
Israel captured Arab east Jerusalem during the 1967 Arab-Israeli Six-Day war. The Palestinians demand the eastern part of the city as their future capital .
Israel plans to build twenty apartments at the site, which formally belonged to the Grand Mufti of Jerusalem, Haj Amin al Hussein.
The land was purchased by American Jewish businessman Irwin Moskowitz, who has purchased Arab property at various locations in east Jerusalem for development by Jewish settler groups. The site was recently used as a base by the Israeli border police.
Palestinian negotiator Saeb Erekat warned that the Israeli plans could torpedo efforts to renew peace talks.