As the Israeli bulldozers began to demolish Shepherd Hotel in the Palestinian Sheikh Jarrah neighborhood of East Jerusalem on Sunday in order to build a new Jewish settlement in its place, Palestinians warned that not only the hotel has fallen, but also the entire peace process and U.S. efforts to revive it.

Nabil Abu Rudeineh, spokesman for Palestinian President Mahmoud Abbas, strongly reacted to the hotel demolition. Its fall, he said, “has brought down with it all U.S. efforts (to revive the peace process) and ended any possibility to return to negotiations.”

Chief Palestinian negotiator Saeb Erekat added, “East Jerusalem and the Sheikh Jarrah neighborhood in particular have been targeted by Israel in a campaign to forcibly remove Palestinians and supplant them with Jewish settlers. Such actions are unlawful and undermine the two-state solution and the negotiations process.”

A part of what was the Shepherd Hotel was once residence of the mufti of Jerusalem, Haj Amin Husseini. After that it was turned into a hotel and later added to it during the Jordanian rule between 1948 and 1967, when Israel occupied East Jerusalem.

Israel took control of the building in the 1980s on the grounds that it was absentee property, meaning the owner did not live in Jerusalem or was a member of an enemy state. It later sold it to Irving Moskovitch, an American multimillionaire and strong supporter of the Jewish settlement in East Jerusalem. Moskovitch applied to build 20 housing units for Jews on that lot as a prelude to building a much bigger settlement in the area and got approval from the Jerusalem municipality, whose mayor and most members share his beliefs on settlements.

Inheritors of the Husseini family said they petitioned the Israeli high court to block the takeover of the hotel and property on the grounds that they are the legal inheritors and that they are Jerusalem residents. The court issued an order preventing carrying out changes on the property, which expired on the day before the bulldozers had come to demolish the hotel.

The Palestinians want to make East Jerusalem the capital of their future state, which is supposed to be established in the West Bank and Gaza on the pre-Israeli occupation lines of 1967. Israel also says a united Jerusalem is its eternal capital and that its future is not up for negotiations.

To make sure East Jerusalem will remain under its control and to offset the demographic balance of the city, Israel had built settlements for Jews only all around the occupied sections of the city and even in the heart of the all-Palestinian neighborhoods. Sheikh Jarrah is one of these neighborhoods, where in some places Israel has removed Palestinians from their homes and replaced them with Jews under the pretext that Jews once owned that property.

Israel “does not have a right to build anywhere in East Jerusalem or in any part of the Palestinian territory occupied in 1967,” said the presidential spokesman, calling on the U.S. to put a stop to this Israeli behavior if it wants to be a credible broker.

Erekat said Israel was demolishing Palestinian homes in East Jerusalem in an effort “to cleanse Jerusalem of its Palestinian inhabitants, heritage and history.”

Israel, he added, “continues to change the landscape of Jerusalem aiming to change its status and turn it into an exclusive Jewish city. This process of cleansing and colonization must be stopped to change the dark reality of Israeli occupation into a free and sovereign Palestinian state with East Jerusalem as its capital.”