The chief Palestinian U.N. delegate said on Wednesday that Arab states had launched negotiations on a resolution condemning Israeli West Bank settlement activity and aimed to have a final draft soon.

An initial text, prepared by more than a dozen countries, was delivered to members of the 15-nation Security Council in December. A group of mostly Arab nations met this month's council president, Bosnian ambassador Ivan Barbalic, in New York to discuss progress on the draft resolution.

"We are beginning the process of text negotiations, and we hope that we can finish this exercise as soon as possible ... to pave the way for action by the Security Council," Riyad Mansour, the permanent Palestinian observer to the United Nations, told Reuters.

"Hopefully this issue will come to a closure this month, by the end of the month," he said, adding they hoped for a vote on the resolution in February.

Diplomats familiar with the draft say it condemns and calls for a halt to Israeli settlement work in the West Bank.

Among those represented at the meeting with Barbalic were the 118-nation bloc of non-aligned nations, the Arab League and the Organization of the Islamic Conference, Mansour said.

Intensive U.S. diplomatic efforts to revive direct peace talks between Palestinian President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu collapsed last year after Israel refused to extend a 10-month partial settlement freeze.

DIRECT NEGOTIATIONS

Palestinian officials have launched a campaign to get as many countries as possible to recognize Palestinian statehood. Karean Peretz, spokeswoman for Israel's U.N. mission, said the Palestinians should instead return to the negotiating table.

"The only road to peace between Israel and the Palestinians is through direct negotiations that address the core concerns of both sides," she said in a statement.

"The Palestinians, time and time again, during the last year have chosen to bypass this path and their attempts only move us further away from returning to the negotiation table and reaching a two-state solution," Peretz said.

The United States could use its veto power on the Security Council to block any attempt to condemn Israeli settlement activity as it did with similar initiatives in the past.

A senior European diplomat said he saw nothing worth vetoing in the draft on Israeli settlements, although it remained unclear what Israel's staunch ally, Washington, would do. The most important question, he said, was what the Palestinians hoped to accomplish with the resolution.

"Is this a plan to avoid negotiations or a way to get back into negotiations?" the diplomat said on condition of anonymity. If the point is to avoid negotiations, then it will have trouble getting through the council, he added.

Mansour said his aim was not to avoid negotiations and that the Palestinians were ready to return to talks with Israel, provided it halts all West Bank settlement work.

"Once Israel complies with this resolution -- meaning to stop all settlement activities immediately -- the day after that we will be ready to go back to negotiations," he said. (Editing by Peter Cooney)