Israeli plans to authorise the construction of hundreds of houses in the occupied West Bank sparked furious protests from American and Palestinian officials yesterday.

In a nod to US requests to suspend all building work at Jewish settlements, Binyamin Netanyahu, the Prime Minister, is offering a freeze on construction at a later date — a peace gambit that did little to mollify those involved in the negotiations leading to a new Middle East peace process.

President Obama had hoped to start formal talks between Palestinians and Israel later this month.

“We regret the reports of Israel’s plans to approve additional settlement construction,” Robert Gibbs, the White House spokesman, said. “As the President has said before, the United States does not accept the legitimacy of continued settlement expansion and we urge it to stop.”

Another US official said: “In the end America will be forced to do what is necessary to bring the Israelis and the Palestinians back to the negotiation table. But the Netanyahu Government has proven difficult to work with.”

Settlement growth has been a key impediment to the peace talks. The Jewish settlements, built on land earmarked for a future Palestinian state, are strongly supported by much of the right-wing constituency that elected Mr Netanyahu.

The new plan, drawn up by Mr Netanyahu and outlined by officials close to him yesterday, seeks to placate the right-wing elements of his coalition, while moving forward on conditions laid down by the Obama Administration.

It proposes that Israel would agree to a freeze of settlement building for up to nine months, excluding 2,500 housing units that are already under construction, and settlement projects in east Jerusalem.

In exchange Mr Netanyahu hopes that Arab states will begin to normalise ties with Israel and allow it to open offices in Arab countries and grant overflight rights for Israeli aircraft. He also plans to approve the construction of approximately 500 additional housing units, bringing the total number to 3,000, aides said.

The proposal infuriated Palestinian negotiators, who accused Israel of posturing for peace while attempting to “worm” more illegal construction into the deal. “What the Israeli Government said [about the planned construction] is not useful. It is unacceptable for us. We want a freeze on all settlement construction,” Mahmoud Abbas, the President of the Palestinian Authority, said. He reiterated that the entire Middle East peace process hinged on a freeze of all Israeli settlement construction.

Mr Abbas is under US pressure to accept Israel’s conditions before a planned summit with Mr Netanyahu and President Obama on the fringes of the UN General Assembly meeting. George Mitchell, Washington’s Middle East envoy, who is due in the region next week, has been pressing Israeli and Palestinian negotiators to reach a basic understanding before the meeting, brokered by the US Administration.

It appeared unlikely, however, that the US knew of Mr Netanyahu’s plan to add an additional 500 homes to those already approved. Kurt Hoyer, a spokesman for the US Embassy in Tel Aviv, said that Washington would be unlikely to accept anything “contrary to the spirit of negotiations they’ve been undertaking”.

American officials have been pushing for a settlement freeze, with a senior State Department official telling the Jerusalem Post newspaper that a nine-month halt to construction would be “long enough to be credible and for negotiations to proceed”.

There has been much speculation over the concessions that Mr Netanyahu is willing to make. In a speech this year he declared for the first time that Palestinians should be granted an independent state.

Nevertheless, construction of settlements in the West Bank has continued, albeit at a slower pace, since he took office. Government figures showed that construction fell by a third in the first half of 2009.

Palestinians hope to make Jerusalem their capital, and the 1967 green line, which roughly demarcates the border upon which the negotiations are being conducted, establishes east Jerusalem as part of a unified Palestinian state.

“Jerusalem is the one issue that Netanyahu will not compromise over,” one MP in the Prime Minister’s Likud party said. Palestinian negotiators have made it clear that no final peace accord will be reached without a Palestinian stake in Jerusalem.

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