UN leader Ban Ki-moon warned that if Israel implemented its latest plan for new settlements it would deal an “almost fatal blow” to any prospects for peace with the Palestinians.

Israel’s announcement about the 3,000 Jewish settler homes, whose planned location was not revealed, came in the wake of a historic vote by the United Nations General Assembly to upgrade Palestine’s diplomatic status.

Israeli media reported that some of the new construction would be in E1, a highly contentious area of the West Bank that runs between the easternmost edge of annexed east Jerusalem and the Maaleh Adumim settlement.

Palestinians bitterly oppose the E1 project, as it would effectively cut the occupied West Bank in two, north to south, and make the creation of a viable Palestinian state even more problematic.

“It was with grave concern and disappointment that the Secretary-General learned of Israel’s announcement of 3,000 new settlement units in east Jerusalem and other parts of the West Bank,” a statement from Ban’s spokesman said on Sunday.

“This would include reported planning in the so-called E1 envelope, which risks completely cutting off east Jerusalem from the rest of the West Bank,” the statement said.

“Settlements are illegal under international law and, should the E1 settlement be constructed, it would represent an almost fatal blow to remaining chances of securing a two-state solution.”

Ban’s statement represented an unusually strong condemnation of Israeli settlement plans from the UN chief and followed a chorus of disapproval from the US, Britain, France and the European Union.

“The Secretary-General repeats his call on all concerned to resume negotiations and intensify efforts towards a comprehensive, just and lasting peace and urges the parties to refrain from provocative actions,” Ban’s statement said.

On Thursday, the UN General Assembly overwhelmingly backed a resolution recognising Palestine within the 1967 borders as a non-member observer state.

Israeli Prime Minister Benjamin Netanyahu had warned that by going to the UN, the Palestinians had “violated” previous agreements with Israel, such as the 1993 Oslo Accords, and that his country would “act accordingly.”

In another tit-for-tat, Israeli Finance Minister Yuval Steinitz said yesterday that the Jewish state would not transfer tax and tariff funds it collects for the Palestinians this month.

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