Ignoring furious Palestinian and US warnings, the Israeli government yesterday approved plans to extend Jerusalem city council's sphere of authority deep into the occupied West Bank.
In effect, the decision means that City Hall, currently controlled by Mr Ehud Olmert - a hardline Likud Party colleague of the Prime Minister, Mr Benjamin Netanyahu, - takes responsibility for planning and building at eight West Bank settlements. Until now, new building projects there required a complex series of checks, culminating in approval by the Defence Ministry.
Palestinian officials are charging that the move amounts to annexation by Israel of part of the West Bank, and have filed a formal complaint with the UN Security Council.
Mr Abu Ala, architect of the deadlocked Oslo peace accords and Speaker of the Palestinian parliament, believes the decision will kill off any lingering peace hopes. "They are firing the bullet that will put the peace process out of its misery," he said yesterday.
On learning late last week of the imminent Israeli government decision, the US Secretary of State, Ms Madeleine Albright, telephoned Mr Netanyahu and reportedly stormed at the very notion of such an "unproductive act". Her spokesman, Mr James Rabin, publicly called the move "provocative", "unfathomable" and likely to cause "further instability".
But Mr Netanyahu, in a typically robust performance yesterday, insisted that the US and Palestinians had misunderstood what was involved. Some outlying suburbs, inside sovereign Israel, were indeed coming under the full authority of Jerusalem council. The West Bank settlements were merely being brought under the logistical control of what is being called an "umbrella municipality" - a shift that would, said Mr Netanyahu, "strengthen Jerusalem", but without "changing the status" of the settlements.
The protests, he said, were "an artificial storm in an artificial tea cup".
Some of Mr Netanyahu's aides are suggesting that the US is not as upset as it is making out and that Ms Albright is merely pretending to be angry, using this issue to "balance" the criticisms she has been levelling at Mr Yasser Arafat's Palestinian Authority in recent days over Arab efforts to secure upgraded status for the Palestinians - from observer to near full-member - at the UN.
The Arab push for upgraded Palestinian status may come this week, but might also be delayed if EU delegates to the UN join the US in opposing the move.
The eight settlements now coming under Jerusalem city council's planning authority include Ma'al eh Adumim, the largest of all West Bank settlements, with a population exceeding 20,000.
While the Defence Minister, Mr Yitzhak Mordechai - one of the more moderate members of the government - used his authority to block or slow some settlement expansion projects, Mr Olmert can be expected to strongly support further settlement growth. The mayor, who is more popular with settlers even than Mr Netanyahu, is a key supporter of the controversial Jewish housing project at Har Homah on the southern edge of Jerusalem, and advocates increased Jewish settlement in traditionally Arab areas of the city.