Israel's hawkish premier on Tuesday agreed to curtail construction in the occupied West Bank in a gesture to Washington that critics said fell far short of US demands for a settlement freeze.

Prime Minister Benjamin Netanyahu, Defence Minister Ehud Barak and Housing Minister Ariel Atias agreed no new tenders for settlement construction in the West Bank should be issued until early 2010.

US President Barack Obama welcomed the move as a step in the right direction but Palestinians and other critics dismissed it as insignificant, saying settlement construction continues in Israeli-occupied Palestinian territory.

"Since the government took office five months ago, it is an indisputable fact that no new tenders have been issued in Judea and Samaria, that is the reality," Atias told public radio, using the Hebrew name for the West Bank.

"It is an attempt to reach understanding with the US administration."

No formal decision

But officials stressed this did not amount to a formal government decision and said the agreement included annexed Arab east Jerusalem, whose fate is one of the thorniest issues in the stalled Middle East peace talks.

"We believe there is no reason to strain relations with the United States and, as a gesture, we decided to temporarily suspend the issuing of new tenders for construction in the West Bank," an official told AFP.

He said this demonstrated "Israel's willingness to move forward with the peace process."

Obama's administration has been pressing for a freeze of settlement construction as a vital step towards reviving peace talks that were relaunched in November 2007 but produced no tangible results before they again came to a halt just over one year later.

The president praised Israel's decision on settlements describing it as "movement in the right direction", after his first White House talks on Tuesday with Egyptian President Hosni Mubarak.

"My hope is that we are going to see not just movement from the Israelis but also from the Palestinians on incitement and security but also from Arab states that shows their willingness to engage Israel," Obama said.

Sensitive to US position

Israel had insisted it could not impose a total freeze as it needs to allow for "natural growth" and the row has brought relations with the United States, its closest ally, to their lowest ebb in years.

"Defence Minister Barak believes that Israel must be sensitive to the US position and not let the pressure increase further," an official said.

The announcement comes ahead of planned 26 August talks in London between Netanyahu and US Middle East envoy George Mitchell.

A government official stressed that "not a single tender has been issued" since the Netanyahu government took office on 31 March. In the first eight months of 2008, 588 such tenders were issued.

But Palestinian negotiator Saeb Erakat insisted Israel "is playing with words in speaking of a freeze in housing construction tenders while continuing construction of 2500 new houses in the settlements".

"Israel must stop all settlement activity without any conditions," he said.

The anti-settlement Peace Now group issued a similar statement, though it put the number of settlement homes under construction at 1000.

"This means that on the ground there is no settlement freeze. A real freeze is the end of all construction, even those yet to be completed," it said.

The group confirmed that Israel has not issued any tenders for West Bank housing construction in months, but said government-sponsored construction only represents 40 percent of all construction in the occupied territory.

The Yesha settler council slammed the decision, saying it was "a dangerous process contradicting the wishes of the Israeli voters and the clear promises made by the prime minister before the elections.

"This is a surrender before the decrees of the American administration," it said in a statement.

About half a million Israeli settlers live in the West Bank, including east Jerusalem. The territory is home to more than three million Palestinians.

The international community views all settlements in lands occupied during the 1967 Six Day War — including annexed east Jerusalem — as illegal.

AFP

It's JZ, leave a message... "Hi, this is Zuma. You know what to do. No, no... not the machine gun. Leave a message..."

Finding love in Zululand Susan Pletts ventures into Zululand and discovers that SA's hidden treasures are its people.

Visit our politics page Need the latest political news, features, interviews and profiles? Visit our dedicated page...