Israel approves 200 new settlements despite unrest, as Kerry looks to ease tensions

JERUSALEM (AFP) - Israel approved new settler homes in east Jerusalem on Wednesday despite mounting unrest, as US Secretary of State John Kerry was set for talks with the Palestinian leader on easing tensions.

The new settlement construction was announced just hours after suspected Jewish extremists torched a West Bank mosque, in another development likely to inflame tempers in an already heated atmosphere.

Months of unrest have escalated in recent days, spreading from annexed east Jerusalem to the West Bank and Arab communities across Israel, raising fears of a new Palestinian uprising.

With no signs of tensions abating, Kerry was set to arrive in Jordan later Wednesday and have a private dinner with King Abdullah II before meeting with Palestinian President Mahmoud Abbas on Thursday.

But so far no meeting with Israel Prime Minister Benjamin Netanyahu has been scheduled, the US State Department said.

Ahead of Kerry's arrival, Abdullah took Israel to task by expressing his "total rejection" of its "repeated aggressions and provocations in Jerusalem," a palace statement said.

Abdullah raised particular concern about tensions at the flashpoint Al-Aqsa mosque compound, the third holiest site in Islam where Jordan has custodial rights.

Abdullah urged global powers to step up peace efforts, warning against "the continuation of Israel's settlement policies".

An Israeli committee, meanwhile, approved plans to build 200 homes in Ramot, a neighbourhood of annexed east Jerusalem, despite recent settlement announcements sparking outrage among the Palestinians.

"It is a decision which is going to cause great harm," city councillor Yosef Pepe Alalu told AFP.

The State Department sharply condemned the plans.

"We are deeply concerned by this decision, particularly given the tense situation in Jerusalem," said spokeswoman Jen Psaki.

"These decisions to expand construction have the potential to exacerbate this difficult situation on the ground, and they will not contribute to efforts to reduce the tension."

Middle East Quartet envoy Tony Blair urged both Israeli and Palestinian leaders to call for restraint and "an end to hostile and provocative acts", including settlement construction.

UN chief Ban Ki-moon demanded both sides do everything possible "to avoid further exacerbating an already tense environment".

Tit-for-tat violence showed no signs of easing, with a pre-dawn arson attack on a mosque in a village between Ramallah and Nablus in the West Bank, which Palestinian security officials blamed on extremist Jewish settlers.

The attack came two days after Palestinian knife attacks killed a settler in the southern West Bank and an Israeli soldier in Tel Aviv.

"When we got there, we couldn't even get close because the fire was raging so strongly," village council head Faraj Nassan told AFP.

"By the time the civil defence (firefighters) got there, the ground floor was completely burnt out." It was the second time in two years that a mosque in the village had been set alight.

Overnight, a Molotov cocktail was thrown at an ancient synagogue in the Arab Israeli town of Shfaram, causing minor damage, police said. The structure is not currently used for worship.

The mosque attack came as Palestinian anger was already running high after Israeli troops shot dead a 22-year-old protester in the southern West Bank on Tuesday.

Since the current round of violence began five months ago with the kidnapping and murder of three Israeli teenagers by militants, at least 17 Palestinians have been killed in the West Bank, according to an AFP count.

Israeli Finance Minister Yair Lapid said the situation was "a real test of leadership" for both Abbas and Netanyahu.

"We must throw a bucket of cold water over the explosive situation... of the last few weeks, and not add fuel to the furnace."

Defence Minister Moshe Yaalon said it was too early to describe the wave of violence as a new Palestinian uprising, but warned the public to be alert for a possible further escalation.

Meanwhile, Israel said Wednesday it will not cooperate with a UN inquiry into its 50-day war with rocket-firing militants in Gaza this summer.

"Israel will not cooperate with the commission" because of its "obsessive hostility against Israel and the words of its president against its leaders," said foreign ministry spokesman Emmanuel Nahshon.

In August, Canadian lawyer William Schabas was named as the head of the UN commission, angering Israel, where he is widely regarded as hostile to the Jewish state over reported calls to bring Netanyahu before the International Criminal Court.