JERUSALEM — Israel has given final approval for a controversial settlement project that would effectively cut off the occupied West Bank from East Jerusalem and divide the territory in two.

Construction in the E1 area has been frozen for two decades amid fierce international opposition. Critics warn it would put an end to hopes for a viable, contiguous Palestinian state.

On Wednesday, a defence ministry committee approved plans for 3,400 homes in E1. Far-right Finance Minister Bezalel Smotrich, who unveiled them last week, said the idea of a Palestinian state was "being erased".

The Palestinian Authority condemned the move, saying it was illegal and would "destroy" the prospects for a two-state solution.

It follows declarations by a growing number of countries of their intention to recognise a Palestinian state, which Israel has denounced.

Israel has built about 160 settlements housing 700,000 Jews since it occupied the West Bank and East Jerusalem — land Palestinians want, along with Gaza, for a hoped-for future state — during the 1967 Middle East war. An estimated 3.3 million Palestinians live alongside them.

The settlements are illegal under international law — a position supported by an advisory opinion of the International Court of Justice last year.

Successive Israeli governments have allowed settlements to grow. However, expansion has risen sharply since Prime Minister Benjamin Netanyahu returned to power in late 2022 at the head of a right-wing, pro-settler coalition, as well as the start of the Gaza war, triggered by Hamas's 7 October 2023 attack on Israel.

The plans for 3,401 housing units in E1 — which covers about 12 sq km (4.6 sq miles) between East Jerusalem and the settlement of Maale Adumim — were approved by the Civil Administration's Higher Planning Council.

The defence ministry body also approved 342 units in the new settlement of Asael, a former outpost in the southern West Bank that was built without government authorisation but was made legal under Israeli law in May.

Smotrich, an ultranationalist leader and settler who oversees the Civil Administration, said: "The Palestinian state is being erased from the table, not with slogans but with actions."

"Every settlement, every neighbourhood, every housing unit is another nail in the coffin of this dangerous idea."

He also urged Netanyahu to "complete the move" and formally annex the West Bank.

Israel effectively annexed East Jerusalem in 1980, in a move not recognised by the vast majority of the international community.

Opponents of the E1 project have warned that it would effectively block the establishment of a Palestinian state because it would cut off the north of the West Bank from the south, and prevent the development in the centre of a contiguous Palestinian urban area connecting Ramallah, East Jerusalem and Bethlehem.

Map showing Israeli settlements and built-up Palestinian areas in the West Bank around Jerusalem – highlighting the E1 settlement in red. Other Israeli settlements are marked in blue and Palestinian areas in light purple. The municipal boundary of Jerusalem is outlined in red. An inset map shows the region’s location within Israel and Jordan.

The Israeli anti-settlement watchdog Peace Now warned: "Under the cover of war, Smotrich and his messianic minority are building a settlement doomed for evacuation in any agreement. E1's sole aim is to sabotage a political solution and rush toward a binational apartheid state."

The Palestinian Authority, which governs parts of the West Bank not under full Israeli control, also condemned the approval of the E1 plans.

"This plan will isolate Jerusalem from its Palestinian surroundings, submerge it in massive settlement blocs" and fragment the West Bank "into disconnected enclaves resembling open-air prisons", the PA's foreign ministry said.

It also alleged that the approval constituted "official Israeli involvement in the crimes of settlement, annexation, genocide, and forcible displacement" – accusations that Israel has long rejected.

The PA's foreign ministry appealed for "genuine international action, including sanctions, to compel Israel to halt its colonial schemes (...) and respect the international consensus on resolving the Palestinian question".

UK Foreign Secretary David Lammy said the E1 plans would, if implemented, "would divide a Palestinian state in two, mark a flagrant breach of international law and critically undermine the two-state solution".

"The Israeli government must reverse this decision," he added.

King Abdullah II of Jordan also rejected the E1 plans, saying: "The two-state solution is the only way to achieve a just and comprehensive peace."

A German government spokesman said settlement construction violated international law and "hinders a negotiated two-state solution and an end to the Israeli occupation of the West Bank".

There was no immediate comment from the US.

However, when asked by Israel's Army Radio on Monday about the Trump administration's stance on E1, ambassador Mike Huckabee said: "Whether or not there should be massive development in E1 is a decision for the government of Israel to make. So we would not try to evaluate the good or the bad of that."

"As a general rule, it is not a violation of international law. And it is also incumbent on all of us to recognise that Israelis have a right to live in Israel."

The July 2024 advisory opinion from the International Court of Justice said Israel's "continued presence in the Occupied Palestinian Territory is unlawful" and that the country was "under an obligation to bring to an end its unlawful presence... as rapidly as possible".

Israel's prime minister said at the time that the court had made a "decision of lies" and insisted that "the Jewish people are not occupiers in their own land". — BBC