ABU DHABI, Jan 9 (Reuters) - U.S. Secretary of State Hillary Clinton said on Sunday Israel’s move to proceed with an East Jerusalem settlement project by razing a derelict hotel undermined the peace effort.

“This disturbing development undermines peace efforts to achieve the two-state solution,” Clinton said in a statement in Abu Dhabi, where she is on an official visit.

“In particular, this move contradicts the logic of a reasonable and necessary agreement between the parties on the status of Jerusalem.”