Israeli Prime Minister Ehud Olmert has barred new construction work, building planning and occupancy tenders at West Bank settlements without his approval, documents show.

The move is meant to bolster U.S.-backed peace talks, soured by disputes over Jewish settlement construction, ahead of a visit by President George W. Bush early next month.

In a December 30 letter to the ministers of defense, housing and agriculture, Olmert wrote that "construction, new building, expansion, preparation of plans, publication of residency tenders, confiscation of land stemming from other settlement activities in the (West Bank) area will not go forward and will not be implemented without requesting and receiving in advance approval by the defense minister and the prime minister."

The letter, a copy of which was obtained by Reuters, does not rule out the prime minister approving construction within West Bank settlements.

His spokesman, Mark Regev, said Olmert committed at talks last week with Palestinian President Mahmoud Abbas not to take "any actions that could prejudice a final status agreement."

Palestinian negotiator Saeb Erekat reiterated on Monday the Palestinians are ready to make peace if Israel freezes all settlement activity in the West Bank and Arab East Jerusalem.

"Settlements and peace do not go together," he said.

Olmert had been caught off guard by a series of Housing Ministry announcements on settlements that have opened a rift in month-old peace talks with the Palestinians.

The talks, launched at a U.S.-sponsored peace conference in Annapolis, Maryland, bogged down since Israel announced plans to build hundreds of new homes in an area near Jerusalem known to Israelis as Har Homa and to Palestinians as Jabal Abu Ghneim.

Palestinians see the building of Har Homa as the last rampart in a wall of settlements encircling Arab East Jerusalem, cutting it off from the rest of the occupied West Bank. They say it is a strategic move by Israel to pre-empt any possibility of East Jerusalem becoming the Palestinian capital.

Plans for new Israeli settlements this month have drawn rare criticism from the United States, as well as the European Union, saying it could undermine Israeli-Palestinian peace efforts.

POLICY DIRECTIVE

Olmert's office said his order applies to all settlements in the West Bank, including Maale Adumim, which Israel hopes to keep as part of any final peace deal.

But officials said Olmert made clear to the Palestinians that building in Har Homa that has already been authorized can go forward. Israel considers Har Homa to be part of Jerusalem, as opposed to the West Bank.

The Palestinians say that the road map's explicit call for a halt to all settlement activity means all Israeli building on occupied land, including within Har Homa, is prohibited.

Israel interprets its road map commitments differently, arguing that construction within built-up areas is permissible as long as no new enclaves are built and no additional occupied lands are confiscated.

"This is a policy directive by the prime minister to relevant government agencies designed to ensure that the machinery of government is ready to implement Israeli obligations under the road map," Regev said.

In addition to Har Homa, Israel's Housing Ministry has announced plans for new building within Maale Adumim.