US secretary of state outlines vision for peace between Israel and Palestine weeks ahead of Donald Trump’s inauguration.

Israel’s settlement expansion in the occupied West Bank threatens both hope for peace with the Palestinians and Israel’s own future as a democracy, John Kerry has said in a speech.

The US secretary of state sounded the warning on Wednesday in a final plea outlining the outgoing Obama administration’s vision for peace between Israel and Palestine.

“The settler agenda is defining the future in Israel. And their stated purpose is clear: They believe in one state: Greater Israel,” Kerry said.

“If the choice is one state, Israel can either be Jewish or democratic, it cannot be both, and it won’t ever really be at peace,” he added.

The speech in Washington, DC comes days after the US abstained from a UN vote to halt all Israeli settlement activity in the occupied West Bank and East Jerusalem.

By declining to use its veto at the Security Council, the US enabled the adoption of the first UN resolution since 1979 to condemn Israel over its settlements policy.

Al Jazeera’s Kimberly Halkett, reporting from Washington, DC, said: “Many question the timing of the US actions with just three weeks until the swearing in of President-elect Donald Trump. Supporters believe it is tough talk that should have come years earlier. Critics argue it shouldn’t have come at all.”

Trump, who had called on the US to veto the UN vote, told reporters that Israel is being treated “very, very unfairly”, maintaining that countries that are “horrible places” never get reprimanded at the Security Council.

He refused to directly answer a question about whether Israel should stop building settlements, saying he is “very, very strong on Israel”.

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Settlements built on Palestinian land are considered illegal under international law.

There are close to 600,000 Israeli citizens living in Jewish-only housing settlements across the West Bank, and at least 200,000 in East Jerusalem, according to the Israeli human rights watchdog B’tselem.

Kerry defended the US decision to abstain from the UN vote, saying they voted “in accordance with our [US] values” and conscience.

“No one thinking seriously about peace can ignore the reality of the threat settlements pose to peace,” Kerry said. “The problem goes well beyond just settlements. Trends indicate a comprehensive effort to take West Bank land for Israel and prevent any Palestinian development there.”

Middle East reactions

Palestinian President Mahmoud Abbas said he was ready to resume peace talks if Israel agreed to freeze settlement construction.

Palestinian chief negotiator Saeb Erekat said: “Abbas is fully convinced that just, comprehensive and lasting peace can be achieved, and it’s doable in all core issues on the basis on the Arab Peace Initiative.”

Specific terms of the Saudi-brokered initiative include ending the Israeli occupation, establishing a Palestinian state with East Jerusalem as its capital on the 1967 borders, and solving issues such as “refugees and prisoners on the basis of the relevant international legality resolutions”, said Erekat.

In his response to the speech, Israeli Prime Minister Benjamin Netanyahu said Kerry’s words were a “great disappointment”.

“If the US is true to its word, it should now come out and say we will not allow any more resolutions in the Security Council on Israel, period,” he added.

The conflict was not about settlements but about “Israel’s very right to exist”, he said.

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In his speech, Kerry insisted that Israel and a future Palestinian state should exist on the territory they held before the 1967 war, which could be achieved through “equivalent swaps” of land only by mutual consent.

Kerry said a fair and realistic solution must be found for the Palestinian refugee issue “with international assistance that includes compensation and options in assistance in finding permanent homes and acknowledgment of suffering”.

There are approximately five million registered Palestinian refugees, many living in camps across the occupied Palestinian territories as well as the neighbouring Arab countries, according to the UN refugee agency.

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“Today, there are a similar number of Jews and Palestinians living between the Jordan River and the Mediterranean Sea,” said Kerry.

“They have a choice. They can choose to live together in one state, or they can separate into two states.”

Al Jazeera’s Andrew Simmons, reporting from Jerusalem, said Kerry’s speech was more of a “massive defence of the US administration’s actions in not vetoing the UN resolution” than a “blueprint for the future”.

Kerry has made it “clear to all where he and Obama stand on the dangers of the two-state solution falling apart”, he said.