The government is planning a major expansion of the Seven Arches (formerly Intercontinental) Hotel on the Mount of Olives. The hotel is the property of the Jordanian royal family and was transferred to the Custodian of Absentee Property after the 1967 Six-Day War.

Because of the sensitivity of the site and the importance of good relations with the Jordanian royal family, Israel until now avoided making any changes in the hotel. Any move affecting the site was done in coordination with the Foreign Ministry and the Jordanian government.

Since talks on a final-status agreement began, the Palestinians have consistently demanded Israel avoid any unilateral steps in violation of the status quo in the eastern part of the city, and the United States is also opposed to any such moves.

Documents obtained by Haaretz indicate that in May, the custodian allowed Miloslavsky Architects to begin promoting a significant expansion of the hotel, from 12,000 square meters to more than 20,000, adding 45 rooms in the north wing, 30 rooms in the south wing, a conference hall and a swimming pool.

The plan notes that to build the hotel, the Jordanian government expropriated public land in 1962, and the site is not included in the general Jerusalem outline plan. In 1994, a detailed plan for the site, prepared by the Absentee Property Custodian, was approved but never implemented and became void three years later.

Journals published by right-wing organizations reported that non-profits who have obtained assets in the Holy Basin have begun showing great interest in the hotel. Chairman of Jerusalem's municipal control committee, Pepe Alalu (Meretz), says the plan is another attempt by the government to torpedo peace talks. He called on Prime Minister Benjamin Netanyahu to stop the plan before it is brought to the planning authorities.

The hotel, a main building with seven arches and two wings connected to it by colonnades, was planned by American architect William Tabler and was operated originally by the international Intercontinental chain. In the 1960s, it was considered the most luxurious hotel in Jerusalem, and in 1964, it hosted the founding conference of the Palestine Liberation Organization. Today, it serves mainly as a pilgrims' hostel and hosts family events. The Custodian of Absentee Property is officially responsible for the hotel's financial management and maintenance.

The treasury spokesman told Haaretz that neither the custodian nor his administration has submitted any request for expansion. "If you have received such a letter, we would be glad to receive a copy to investigate," the spokesman said. However, no further comment was received from the treasury after Haaretz forwarded a copy of the letter.