JERUSALEM, Aug 8: Israel was on collision course with US again on Sunday after it approved the construction of hundreds of new houses in one of the largest and most controversial of the West Bank settlements.

Just days after the government received a slap on the wrist over plans for 600 new homes in the largest of the Jewish settlements, Maale Adumin, news emerged that Defence Minister Shaul Mofaz had signed permits for the construction of the housing units on the western fringes of Ariel.

The Maariv daily reported that the go-ahead for 300 houses, which would be in contravention of the US-backed roadmap for peace plan, was agreed three months ago. But tenders had not yet been issued due to "diplomatic considerations".

A government source confirmed that the project had been approved but said the green light was given around six months ago, adding that it would involve nearer 200 than 300 houses.

Ariel mayor Ron Nachman told AFP that the new tranche formed part of a wider "development plan" for 2,000 homes that was given the go-ahead several years ago. Ariel, home to around 18,000 residents, lies some 12 miles (20 kilometres) to the east of the internationally-recognized boundary between Israel and the West Bank, the so-called Green Line.

Under the terms of the roadmap, Israel is obliged to freeze all settlement activity in the occupied Palestinian territories. But news of the expansion plans for Ariel follows confirmation by the government last week that 600 homes had been approved for Maale Adumin which lies just outside Jerusalem.

That announcement prompted the US State Department to tersely remind Israel that "the roadmap calls for an end to all settlement activities, including natural growth", a point taken up by visiting White House envoy Elliott Abrams in talks with Prime Minister Ariel Sharon last Thursday.

The Israeli anti-settlement watchdog Peace Now charged that Mofaz and Sharon "were acting like thieves in the night" and damaging the special relationship with the United States.

"The construction of hundreds of new housing blocks east of the Green Line is a death blow to the solution of two states for two people and damages any future attempt to reach a permanent agreement with the Palestinian people," it said in a statement.

A US diplomatic source also expressed new disquiet about the Ariel expansion. "The roadmap calls for a freeze on all settlement activity," he said. "This seems to me to be in conflict of those obligations."

The peace blueprint, which aims for the creation of a Palestinian state in 2005 living in peace and security next to Israel, has made next to no progress since it was endorsed in June last year.

Top-level Israeli-Palestinian contacts have been frozen for nearly 12 months but security officials were expected to meet later Sunday in a bid to finalize an agreement on arming Palestinian security forces in the West Bank.

The West Bank has been gripped by growing lawlessness in recent weeks, including kidnappings and arson attacks on government buildings. But while the Palestinian Authority has vowed to restore law and order, its room for manoeuvre is limited as Israel retains security responsibility for nearly all of the territory, banning Palestinian police from strapping on weapons.

The Israeli army's chief of staff, General Moshe Yaalon, said while he supported the idea of allowing the security forces to be armed, any such move had to be taken in coordination between both sides.

"In the West Bank where we operate, we have trouble distinguishing between police and terrorists and therefore we must coordinate our actions with the Palestinian Authority," he told Israeli public radio.

"We must avoid our respective forces firing at each other ... We are going to try and work out the areas where the Palestinian police can carry weapons so that they can fight against this anarchy."

Sharon told Sunday's cabinet meeting that he supported the idea of Palestinian police being armed but that Israel would decide on which individuals would have the right to bear weapons, adding that they would be restricted to carrying handguns. -AFP