Israeli Prime Minister Benjamin Netanyahu has claimed Jewish settlements in East Jerusalem will be part of Israel in any peace settlement.

Declaring "Jerusalem is not a settlement," Israeli Prime Minister Benjamin Netanyahu struck a defiant note after US criticism of Jewish construction in disputed territories in and around the city.



His speech in Washington to the American Israel Public Affairs Committee, or Aipac, an influential pro-Israel lobby group, contrasted sharply with an address Secretary of State Hillary Clinton made at the same forum hours earlier.



Mrs Clinton, who followed up her speech with low-profile talks with Mr Netanyahu, said Israeli settlement policy in East Jerusalem and the West Bank endangered peace talks with the Palestinians, an argument the prime minister dismissed.



"The Jewish people were building Jerusalem 3,000 years ago and the Jewish people are building Jerusalem today. Jerusalem is not a settlement. It's our capital," Mr Netanyahu said.



Palestinians want East Jerusalem, which Israel captured along with the West Bank in a 1967 war, as the capital of a future state.



The United States and Israel have clashed since Netanyahu's coalition government announced plans this month to build 1,600 homes for Jews near East Jerusalem.



Mr Netanyahu began a three-day visit to Washington yesterday, hoping to repair relations with President Barack Obama, whom he meets at the White House today.



Announcement of the housing project coincided with a visit by US Vice President Joe Biden - president Netanyahu said he was blindsided by bureaucrats - and prompted Palestinian President Mahmoud Abbas to delay the start of indirect, US-mediated peace talks.



Pointing to what he has described as a national consensus in Israel over its claim to all of Jerusalem, Netanyahu told Aipac that all Israeli governments had carried out construction in what he termed the city's "Jewish neighbourhoods" since 1967.



"Everyone knows, everyone - Americans, Europeans, Israelis certainly, Palestinians - everyone knows that these neighbourhoods will be part of Israel in any peace settlement. Therefore, building them in no way precludes the possibility of the two-state solution," he said.



In her speech, Mrs Clinton said new construction in East Jerusalem or the West Bank "undermines mutual trust and endangers the proximity talks" that are the first step towards full negotiations, suspended since December 2008.



"It exposes daylight between Israel and the United States that others in the region could hope to exploit. And it undermines America's unique ability to play a role - an essential role, I might add - in the peace process."



But she said US support for Israel was "rock solid, unwavering, enduring, and forever."



Mrs Clinton had called announcement of the new housing project "insulting" and demanded Netanyahu outline specific steps to restore confidence in the peace process - something both sides say he has now done, although neither has released specifics.



Israeli officials said Clinton and Netanyahu had shown at their meeting a desire to put the public feud fuelled by the construction project behind them.



Under US and international pressure, Netanyahu announced a 10-month moratorium on new housing starts in Jewish settlements in November. He excluded East Jerusalem and nearby annexed areas of the West Bank from the building freeze.



Palestinian officials have continued to insist that Israel's decision to continue settlement building in and around East Jerusalem would prove fatal to the peace process.



US envoy George Mitchell urged a period of "calm and quiet" after meeting Abbas in the Jordanian capital, Amman, on Monday. The State Department said Mitchell later left en route for Washington.

Reuters