Settlements 'a ploy to block Arab state'

Diplomats said in a report endorsed by 22 heads of mission posted in east Jerusalem and the West Bank that Tel Aviv's settlement construction posed "the biggest single threat to the two-state solution."

It outlined recommendations urging EU states to avoid any funding anything that could feed into Israel's settlement-building programme, effectively calling for a financial embargo.

Written by EU heads of mission in Jerusalem and Ramallah, the Jerusalem Report 2012 described Israel's settlement construction in east Jerusalem as "systematic, deliberate and provocative," accusing it of making deliberate political choices that threaten to make the two-state solution impossible.

An Israel spokesman dismissed the report, insisting that the diplomats had failed in their mission.

"A diplomat's mission is to build bridges and not to encourage confrontation," huffed foreign ministry spokesman Yigal Palmor.

The 15-page report highlighted construction in Har Homa, Gilo and Givat HaMatos as being the "most significant and problematic," saying that if building continued unabated it would cut the area off from Bethlehem by the end of the year.

"The construction of these three settlements is part of a political strategy aiming at making it impossible for Jerusalem to become the capital of two states," it warned.

"If the current pace of settlement activity … persists, an effective buffer between east Jerusalem and Bethlehem may be in place by the end of 2013, thus making the realisation of a viable two-state solution inordinately more difficult, if not impossible."

The report suggested that member states "prevent, discourage and raise awareness about problematic implications of financial transactions, including foreign direct investments, from within the EU in support of settlement activities, infrastructure and services."

It also urged member states to "ensure that imports of settlement products do not benefit from preferential tariffs" and that all such products are clearly labelled as originating from areas considered illegal under international law.