The U.S. is confident proximity talks between Israel and the Palestinians will continue, despite recent tension over Israel's plan to construct 1,600 new housing units in an East Jerusalem neighborhood, State Department official Philip J. Crowley said on Monday.

"They have begun," Crowley said referring to indirect peace negotiations between Israel and the Palestinians. "I'm confident that there will be another round of proximity talks."

He added, however, that the administration wants to make sure that both sides are committed to making progress.

"We are prepared to have talks that address the substance, the core issues at stake in the peace process," Crowley said.

Israel's ambassador to the United States, Michael Oren, over the weekend told the country's diplomats there that U.S.-Israeli relations face their worst crisis in 35 years, despite attempts by office to project a sense of "business as usual."

Netanyahu consulted Sunday with the forum of seven senior cabinet ministers over a list of demands regarding the peace process that U.S. Secretary of State Hillary Clinton made in a telephone conversation Friday.

Crowley added that the U.S. administration has "specific concerns about not only the substance of an announcement, the timing of an announcement, but its broader implication in terms of jeopardizing, you know, further progress on the peace process."

Crowley stressed that despite the crisis, the U.S. "commitment to Israel's security, as the vice president said last week, remains unshakable."

Quartet to discuss Mideast peace in Moscow

U.S. Secretary of State Hillary Rodham Clinton will travel to Moscow this week to hold talks with international partners on the Middle East peace process, the State Department said earlier Monday.

Clinton is due in the Russian capital to meet with the UN Secretary General Ban Ki-moon, Russian Foreign Minister Sergei Lavrov and EU foreign policy chief Catherine Ashton.

The European Union, Russia, United Nations and United States form the international mediating group for the Israeli-Palestinian conflict known as the "Quartet."

Former British Prime Minister Tony Blair, the Quartet representative for economic development in Palestinian territories, and U.S. special envoy George Mitchell will also attend, the State Department said.

The European Union made a new push Monday to revive the stalled Mideast peace process, offering to raise aid to the Palestinians and beef up its security missions in Lebanon and the Palestinian areas to help Israel.

EU ready to step up involvement in peace talks

Reflecting Europe's frustration over the deadlocked peace process, Ashton criticized Israel's east Jerusalem building plan and the Palestinian leadership's reluctance to embrace reforms.

Ashton said the EU wants the Quartet to do more to nudge Israel and the Palestinians to peace.

"The European Union is ready to step up its involvement in the peace process," Ashton said in an address to the Arab League in Cairo, opening a four-day tour of the Middle East.

Ashton, who has faced criticism in Europe for not being visible enough since her appointment in December, arrived in Egypt on Sunday evening to start a tour that will take her to Israel, the Palestinian territories, Lebanon, Syria and Jordan over the course of the week.

Ashton said the EU will support a Palestinian state with agreed changes to the borders of 1967, with Jerusalem as the capital of both Israel and Palestine.

"The EU is also ready to extend aid to Palestinians - if there is credible movement to a two-state solution - and consider further political, financial and security guarantees," Ashton said, without elaborating.

The security comment referred to an EU peacekeeping mission in southern Lebanon, a police training mission in the West Bank and a border monitoring operation on the Israel-Gaza border.

These missions were launched several years ago in response to Israeli demands for more law and order in Palestinian areas.

"The international community including our Arab nations should offer guarantees to the parties so they can take the necessary steps toward peace," Ashton said.

In a brief press conference after meetings with Egyptian Foreign Minister Ahmed Aboul-Gheit and head of intelligence Omar Suleiman, Ashton praised Egypt's role in brokering talks between Israel and the Palestinians and between rival Palestinian factions.

Despite the "difficult situation" in the region, Ashton said Europe was "determined" to move peace talks between Israelis and Palestinians forward.

She arrives in the region at a time when international efforts to restart even indirect talks between Israelis and Palestinians are in peril.

Aboul-Gheit, Egypt's foreign minister, on Monday told reporters he and Ashton had discussed Europe's commitment to halting the expansion of Israeli settlements in the West Bank.

"Israel must understand that the international community is angry... and that there must be a price," Aboul-Gheit said.