Prime Minister Benjamin Netanyahu ordered on Tuesday a reassessment of plans to build nearly 24,000 settler homes, saying he feared an international outcry that would divert attention from Israel's lobbying against a nuclear deal with Iran.
The right-wing Israeli leader announced the reversal in the face of stiff U.S. opposition to settlement expansion in the occupied West Bank and East Jerusalem, and Palestinian anger that threatens three-month-old peace talks brokered by Washington.
Before news of Netanyahu's change of course, President Mahmoud Abbas ordered the Palestinian leadership to hold "an urgent emergency meeting in the coming hours, with all options on the table," the Palestinian Maan news agency reported.
Peace Now, which monitors settlement activity on occupied land Palestinians seek for a state, said the Housing Ministry had issued tenders late last month for drawing up construction plans, but that no building work was imminent.
Publication of the tenders had gone unnoticed in the media until Israel's left-leaning Haaretz newspaper and Peace Now reported on the potential projects earlier on Tuesday.
Netanyahu, a strong advocate of settlement building, appeared to have been caught unawares by the proposals, which were disclosed only days after U.S. Secretary of State John Kerry visited Israel and the West Bank in a bid to salvage peace negotiations that have shown little sign of progress.
Before leaving Israel, amid Netanyahu saying that "a very bad deal" was in the making between world powers and Iran over its nuclear program, Kerry urged the Jewish state to limit settlement activity.
In a slap down of a key partner in his governing coalition, Netanyahu reprimanded Housing Minister Uri Ariel of the pro-settler Jewish Home party for publishing the tenders "without prior coordination."
A statement issued by Netanyahu's office said he ordered Ariel to reassess all of the proposed projects.
Publication of the tenders "created a needless confrontation with the international community just when we are making an effort to persuade (it) to reach a better agreement with Iran," the statement said.
"World attention must not be diverted from the primary goal - preventing Iran from achieving an agreement that would enable it to continue its nuclear military program," Netanyahu's statement said.
Israel, widely believed to be the Middle East's only atomic power, has been pushing for total dismantling of Iran's nuclear-enrichment capabilities and cautioning against any premature easing of economic sanctions.
In its report on the Housing Ministry plans, Peace Now said they envisaged 19,786 additional settler homes in the West Bank and 4,000 in East Jerusalem.
One of the tenders, the group said, included plans for 1,200 more housing units in the highly sensitive E-1 area, sandwiched between Jerusalem and Ramallah, the Palestinian seat of government.
In Washington, State Department spokeswoman Jen Psaki said at her daily briefing the United States was both caught unawares and displeased by the building plans.
"We are deeply concerned by these latest reports that over 20,000 additional units are in the early planning stages," she said. "We were surprised by these announcements and are ... seeking further explanation from the government of Israel."
Under U.S. pressure, Israel had suspended previous projects to build more than 3,000 settler homes in E-1. Hours before ordering the overall tender review, Netanyahu swiftly froze the new E-1 initiative, political sources said.
Palestinians fear Israel's settlements in areas it captured in the 1967 Middle East war will deny them a viable state. Most countries consider the enclaves illegal under international law. The United States describes the settlements as illegitimate.
Israel cites historical and biblical links to the West Bank and East Jerusalem, where more than 500,000 Israelis now live alongside 2.5 million Palestinians.
A Housing Ministry spokesman, in comments to Reuters before Netanyahu's announcement, said only a small fraction of the blueprints it commissions annually lead to construction.
"The tenders are a basis for building plans and they all still have to go through lengthy legal procedures before building starts," said the spokesman, Ariel Rosenberg.
Netanyahu has accused the Palestinians of creating "artificial crises" over the settlement issue and has said that most of Israel's building in the West Bank and East Jerusalem is in areas it intends to keep in any future peace deal.
(Additional reporting by Ori Lewis and Noah Browning; Editing by Philip Barbara)