JERUSALEM — Israel will build in Jerusalem and elsewhere according to its strategic interests, Prime Minister Benjamin Netanyahu said, after his approval of new settlement construction drew international criticism.

Israel approved building plans that include construction in the West Bank area known as E1, less than 24 hours after the United Nations General Assembly voted in favor of a resolution recognizing Palestine as a non-member observer state on Nov. 29.

“Today we are building and we will continue to build in Jerusalem and in all areas that are on the map of the strategic interests of the state of Israel,” Netanyahu told the weekly Cabinet meeting.

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The Palestinian move to upgrade its status at the United Nations was a “gross violation” of its peace agreement with Israel, he said, according to an emailed statement from his office. Both sides signed the 1993 Oslo Accords, an interim agreement intended to pave the way for a permanent treaty.

Approving the construction of 3,000 homes in Jerusalem and the West Bank was a reaction to the Palestinian bid to upgrade its status at the United Nations, Israeli Defense Minister Ehud Barak said.

Barak denied a report in today’s Haaretz newspaper that he told U.S. officials the decision to build was primarily due to electoral considerations by Netanyahu’s Likud party ahead of the Jan. 22 parliamentary elections.

“Barak said in his discussions in the U.S. that the Israeli government has for the past 20 years retained the right to build in E1,” the ministry said in an emailed statement. “The Defense Minister said the construction was not due to electoral considerations, but that during the election period such a reaction should be expected to the U.N. decision.”

Withholding Funds

Israel is also planning as a punitive measure to withhold the transfer of taxes it collects from Palestinians on behalf of the Palestinian Authority and instead use the money to pay the authority’s debt to Israel Electric Corp., Reshet Bet radio reported, citing comments by Finance Minister Yuval Steinitz.

The Palestinian Authority, the United Nations, and the United States consider all Israeli settlements in the West Bank illegal.

The area called E1, east of the capital between Jerusalem and the Jewish settlement of Maaleh Adumim, is particularly sensitive. Israeli construction there may cut off Palestinians from east Jerusalem, which they plan as their capital in a future peace accord.

Israeli settlements and east Jerusalem construction “are counterproductive and make it harder to resume direct negotiations or achieve a two-state solution,” U.S. National Security Council spokesman Tommy Vietor said on Nov. 30.

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Renewed Tension

The Israeli decision may lead to a renewed period of tension between Netanyahu and President Barack Obama, whose administration criticized similar steps on West Bank settlement construction during its first term.

“The Americans appear angry over this, and we may now see a return to a period of strained relations between the U.S. and Israel,” said Galia Golan, a political scientist at the Interdisciplinary Center Herzliya north of Tel Aviv. “While we don’t know if Obama was planning to be more engaged in the peace process in his second term, this is certainly not a good start from Netanyahu’s perspective.”

Palestinian Authority President Mahmoud Abbas told a rally in Ramallah today that last week’s U.N, vote was “the beginning of a new era” and “the recognition of Palestine has changed the rules of the game.”

Abbas, whose Fatah faction controls the West Bank, said he would spend the next few days holding meetings to advance the reconciliation process with the Hamas Islamic movement that rules the Gaza Strip.

Fatah and Hamas split after a violent confrontation in Gaza in 2006. Hamas is classified as a terrorist organization by Israel, the United States, and European Union.

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