Officials confirmed yesterday that the route will loop around the huge Jewish settlement of Maale Adumim, which was built on West Bank land occupied by Israel since 1967. Work is expected to begin within weeks.

The route was approved by the Israeli Cabinet in February and already appears on Israeli Defence Ministry maps, but it has been mired in controversy ever since President Bush criticised the plans of Ariel Sharon, the Israeli Prime Minister, to expand Maale Adumim’s 32,000-strong population on to surrounding virgin hilltops, adding another 3,650 homes.

Palestinians hoped that Mr Bush’s warning to Mr Sharon in Texas last month that there should be “no expansion of settlements” would persuade Israel to reroute the £1 million-a-mile barrier. However, Mr Sharon regards the annexation of Maale Adumim as Israel’s reward for pulling out of the Gaza Strip — and he also wants other blocs, such as Gush Etzion and Ariel. Each holds more Jewish settlers than the Gaza outposts put together.

Israeli officials, encouraged by Mr Bush’s acknowledgement last year that these “major Israeli population centres” were “new realities on the ground”, believe that gaining this land will effectively expand eastwards the Jewish state’s boundaries before any future deal on final borders.

Palestinians protest that the expansion of what they call the “apartheid wall” — and Israel calls a “security fence” — will cut off east Jerusalem from the rest of the West Bank. They argue that the expanding network of Israeli settlements, bypasses, roads and walls across east Jerusalem will choke off Palestinian growth in metropolitan Jerusalem, which, though a relatively tiny area, accounts for 35 per cent of the economy of the entire West Bank and Gaza Strip.

“East Jerusalem is our capital and without east Jerusalem there can be no Palestinian state,” Hind Khoury, the Palestinian minister responsible for Jerusalem affairs, said.

One third of the proposed 450-mile barrier has been built. The American position is that the barrier is a problem to the extent that it “prejudges final borders, confiscates Palestinian property or imposes further hardship on the Palestinians.”

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