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Prime Minister Benjamin Netanyahu will seek to extend an informal agreement reached between his predecessor Ehud Olmert and the George W. Bush administration on the issue of West Bank settlement construction, and use it as the basis for negotiations with the Barack Obama government in Washington.

The Olmert-Bush agreement was reached ahead of the 2007 Annapolis conference between Israel, the Palestinians and the United States, according to a senior Israeli official. Netanyahu was briefed in recent weeks on various aspects of the understanding, some of them recorded, others reached verbally.

"The understandings Olmert reached contain clauses that are good for Israel, and can certainly form a basis for understandings with the Obama administration," the official said, adding that the Bush government never agreed formally to the Israeli proposal, but in practice adhered to its guidelines and refrained from significant criticism of new settlement projects that met the criteria outlined in the agreement.

The understanding is an extension of a similar undocumented pact reached during the tenure of Olmert's predecessor, Ariel Sharon, and divides West Bank construction projects into four categories - those involving Jerusalem, settlements in major blocs, isolated settlements outside the blocs and unauthorized outposts. Regarding Jerusalem, Israel refused to accept any limitations whatsoever on developing Jewish neighborhoods in the city's eastern neighborhoods. On settlements in the major blocs (such as Ma'aleh Adumim), construction would be allowed even beyond the existing borders, as long as it remained in close proximity to the community itself ("No farther than two hills from houses at the settlement's edge," according to the official.)

In isolated settlements outside the major blocs, building will be allowed only within the existing construction boundaries, beyond which communities will not be permitted to develop. Unauthorized outposts, according to the agreement, must be evacuated.

In addition, Israel promised not to erect any new settlements, not to expropriate Palestinian land for settlement construction, and not to issue government incentives for settling communities beyond the Green Line, all promises made during the Sharon administration.

After the Annapolis conference, in accordance with the agreement, Olmert authorized the construction of thousands of new housing units in East Jerusalem and the major settlement blocs, decisions which raised minimal or no criticism from Washington.