In a marked shift from his previously unqualified allegiance, Stephen Harper has told Benjamin Netanyahu that Canada does not support the Israeli government's decision to revive plans for settlements east of Jerusalem.

The Prime Minister believes the settlements would further impair efforts to achieve peace between the Israeli and Palestinian peoples – a message he conveyed directly to the Israeli Prime Minister during a phone call Saturday, Foreign Affairs Minister John Baird told The Globe and Mail.

Mr. Harper's warning marks a rare breach with Israel, which the Conservative government has staunchly defended even when other allies have not. Canada cast one of only a handful of votes opposing the United Nations General Assembly decision last week to grant the Palestinians the status of non-voting observer state at the UN.

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"The Palestinians' actions last week were very unhelpful to the cause of peace, and the Israeli response of settlement expansion is very unhelpful to the cause of peace," Mr. Baird said.

Mr. Harper's phone call was one of a series of actions that bring the government into closer alignment with its American and European allies on the Middle East.

Having previously warned of "consequences" through Canadian sanctions because of the Palestinian campaign for greater recognition, Mr. Baird indicated Wednesday that no further actions are planned.

"When we said 'consequences' I think the media implied that we would break off relations and cut aid, but we never said either" option was on the table, Mr. Baird said.

Instead, the government limited its gestures of displeasure to having Mr. Baird express that displeasure in a speech to the General Assembly, and by recalling envoys for consultations.

And having stood four-square with Israel during its latest hostilities in Gaza and in its campaign against promoting the Palestinian cause at the UN, Canada has now chosen to admonish Mr. Netanyahu over the settlement plans.

Though the United States and European nations roundly condemned the Israeli decision, the Harper government's response had been muted, characteristic of its determination to stand with Israel come thick or thin.

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But the settlements have, in fact, proven to be a step too far for the Conservatives.

Continued funding for the Palestinians, which has amounted to $300-million over the past five years, is by no means guaranteed. Mr. Baird said future aid projects will be assessed on their merits. Decisions to fund or not fund will not be influenced by the UN vote, he maintained.

But Mr. Baird added that the government will be watching the Palestinians' next steps carefully. In particular, any attempt by the Palestinian Authority to exploit its new standing by going to the International Criminal Court with charges that Israel was violating international law, "would cause us great concern," he said.

Though Mr. Baird did not say what actions Canada might take, he made it clear that the federal government would consider such a move a provocation that would merit a strong response.

Mr. Baird dismissed criticism that the government's staunch support for Israel had damaged Canada's standing with other Middle Eastern nations, saying that in numerous visits to the region he had found relations with other Arab leaders to be cordial.

Editor's Note: An earlier version of this story, which has been corrected, had the wrong date of the phone call between Prime Minister Stephen Harper and Israeli Prime Minister Benjamin Netanyahu.