US Secretary of State Hillary Clinton expressed disappointment Wednesday that Israeli settlement building had deadlocked Middle East peace talks but remained optimistic about progress.
"We still believe a positive outcome is both possible and necessary," Clinton told a press conference in Washington. "Consultations continue on all sides and we will persevere."
Both Clinton, who is to hold talks Thursday with Israeli Prime Minister Benjamin Netanyahu, and US President Barack Obama have condemned Israel for plans to build more than 1,300 new homes in annexed Arab east Jerusalem.
Direct peace talks began in September but ran aground six weeks ago when an Israeli moratorium on West Bank settlement construction expired, prompting the Palestinians to freeze negotiations until Israel reimposes the ban.
About 500,000 Israelis live in more than 120 settlements across the Palestinian occupied territories, which include the West Bank and east Jerusalem.
Palestinian leader Mahmud Abbas sees Jewish settlements as a major threat to the establishment of a viable state and views the freezing of settlement activity as a crucial test of Israel's intentions.
Obama has made kick-starting the deadlocked Middle East peace process a central plank of his foreign policy and Clinton refused to give up hope.
"I remain convinced that both Prime Minister Netanyahu and President Abbas want to realize the two-state solution," she said.
"Like any very difficult political challenge, it is often hard to find the path forward but we're absolutely committed to doing everything we can to assist the parties in doing so."
The United States on Tuesday disputed Israel's claims that the new settlements, which drew a furious response from the Palestinians, had no bearing on the peace talks.
"To suggest that this kind of announcement would not have an impact on the Palestinian side I think is incorrect," State Department spokesman Philip Crowley said.
At Wednesday's press conference, which featured Palestinian prime minister Salam Fayyad in Ramallah via video-link, Clinton also announced 150 million dollars in new assistance to the Palestinian Authority and called for other donor countries to step up aid.
The new funding was described as budget support for the Palestinians and is separate from the 400 million dollars in aid that Obama pledged in June during a White House visit by Palestinian leader Mahmud Abbas.
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