Prime Minister Benjamin Netanyahu's office issued a statement Tuesday responding to criticism by the United States over Israel's plan to build 1,300 new homes in East Jerusalem, emphasizing that Israel is doing nothing to harm the peace process.

"Jerusalem isn't a settlement – Jerusalem is the capital of Israel," the statement by the Prime Minister's Office read. "Israel has never put any sort of limits on construction in Jerusalem, where some 800,000 people reside, and didn't do so during the 10-month settlement freeze in the West Bank either."

Open gallery view Prime Minister Benjamin Netanyahu at the GA conference in New Orleans, November 9, 2010. Credit: AP

The statement was referring to a temporary moratorium on construction in West Bank settlements declared by Netanyahu last November. The moratorium expired late last month, bringing recently renewed direct peace talks between Israel and the Palestinians to a halt.

Earlier Tuesday, U.S. President Barack Obama warned that Israel's new building plan could obstruct the peace process.

"This kind of activity is never helpful when it comes to peace negotiations," said Obama, adding that he was concerned Israel and Palestinian were not making enough of an effort to advance peace negotiations.

Netanyahu, on the other hand, stressed that building in Jerusalem hasn't impeded the peace process in 40 years, so there is no reason it would be an obstacle now.

"Israel does not see any connection between the peace process and the building and planning policy in Jerusalem, which hasn't changed for 40 years," Netanyahu's statement said.

"Every Israeli government in the last 40 years has built in all parts of the city. During this period, peace agreements were signed with Egypt and Jordan and for 17 years, peace negotiations with the Palestinians were carried out. These are historical facts. Construction in Jerusalem has never disrupted the peace process.

Our difference of opinion with the United States regarding Jerusalem is well-known. This, also, isn't a new development and is something that has been going on for 40 years. We hope to overcome this and continue moving forward with the peace process. Prime Minister Benjamin Netanyahu is looking forward to his meeting on Thursday with U.S. Secretary of State Hillary Clinton, in order to push peace talks forward."