Pat Dollard

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* Netanyahu rejects full freeze to settlement growth
* Obama wants halt to settlement activity
* Palestinians see settlements as threat to statehood

JERUSALEM, May 24 (Reuters) – Israeli Prime Minister Benjamin Netanyahu on Sunday rebuffed U.S. calls to impose a freeze on all settlement activity in the occupied West Bank, setting the stage for friction with President Barack Obama.

“We do not intend to build any new settlements, but it wouldn’t be fair to ban construction to meet the needs of natural growth or for there to be an outright construction ban,” Netanyahu told his cabinet, according to officials.

The note of defiance came less than a week after Netanyahu held talks in Washington with Obama, who wants Israel to halt all settlement activity, including natural growth, as called for under a long-stalled peace “road map”.

Netanyahu’s comments reaffirmed a position he took in his bid for the premiership in a February election. By natural growth, Israel refers to construction within the boundaries of existing settlements to accommodate growing families.

Obama was expected to prod Netanyahu and Palestinian President Mahmoud Abbas to resume long-stalled peace talks during a major speech in Cairo early next month.

Abbas has ruled out restarting those talks until Netanyahu, whose right-leaning government took office on March 31, commits to a two-state solution and halts settlement expansion.

Obama has surprised Israel with his activism on the settlement issue, but it is unclear how much pressure he will put on Netanyahu to freeze construction entirely, Israeli and Western officials said. Former President George W. Bush called for a freeze but building continued largely unchecked, Israeli anti-settlement advocacy groups say.

Half a million Jews live in settlement blocs and smaller outposts built in the West Bank and Arab East Jerusalem, all territory captured by Israel in the 1967 Middle East War.

The World Court says all are illegal. The United States and European Union regard them as obstacles to peace.

Palestinians see the settlements as a land grab meant to deny them a state in the West Bank and the Gaza Strip.

PEACE TALKS

Mark Regev, a spokesman for Netanyahu, said the fate of existing settlements should be decided in negotiations with the Palestinians. “In the interim period, we have to allow normal life in those communities to continue,” he said.

Netanyahu has so far balked at committing to entering negotiations with the Palestinians on territorial issues.

A senior Israeli official, speaking on condition of anonymity, said Netanyahu’s government hoped to sidestep U.S.
pressure by committing to uproot smaller hilltop outposts built without official authorisation, a step also set by the road map.

“Moving on outposts is relatively easy” compared to freezing growth of larger settlements, which Israel wants to keep as part of any future peace deal, the Israeli official said.

Last week, Israel flattened a small outpost near the West Bank city of Ramallah, but residents returned to rebuild.
Ahead of Sunday’s cabinet session, Defence Minister Ehud Barak said Israel would remove more than 20 other outposts, either through negotiations or with force, but gave no timeline.