The United States launched a new Middle East peace mission on Thursday, predicting “serious” efforts to revive negotiations even as Israel vowed to keep building settlements that Palestinians want frozen.

U.S. mediator George Mitchell flew in for his first shuttle talks since Israeli Prime Minister Benjamin Netanyahu returned a month ago from a low-profile meeting with President Barack Obama that underscored a rift between the two leaders.

Netanyahu still has not responded publicly to what political sources have said was a list of 11 “confidence-building” steps Obama wants him to take to coax the Palestinians back into negotiations suspended since December 2008.

But Netanyahu has rebuffed U.S. and Palestinian calls to halt the construction of homes for Jews on occupied land in and near Jerusalem, referring to those areas as Israeli neighbourhoods no different than those in Tel Aviv.

“Our policy in Jerusalem will not change. It’s not just my policy, it’s the policy of all my predecessors since 1967,” he told Israel’s Channel Two television in an interview.

“There won’t be a freeze in Jerusalem … Why do I need to give up on Jerusalem?”

Netanyahu did not refer to Mitchell, who he was due to meet on Friday. But he voiced satisfaction in Israel’s past goodwill gestures toward the Palestinians and said the onus was on them to usher in talks.

“I think that a full understanding is starting to be formed — maybe even more than starting — that this matter of preconditions should be dropped,” he said.

In Washington, State Department spokesman P.J. Crowley said the decision to dispatch Mitchell was made late on Wednesday following a round of conversations among senior U.S. officials and Israeli and Palestinian counterparts.

“We don’t go to meet just to meet. We go there because we have some indication that both sides are willing to engage seriously on the issues,” Crowley told a news briefing.

“There’s been a good give and take, and that is why George is there today,” he said.

PROXIMITY

Palestinian officials said Mitchell would also see Palestinian President Mahmoud Abbas on Friday in the West Bank.

The Palestinians say they will not attend negotiations with Israel — envisaged, for now, as indirect “proximity” talks mediated by the Americans — without a settlement freeze in the West Bank and East Jerusalem. Israel captured those territories, along with Gaza, from Jordan and Egypt in the 1967 war.

The future of an already strained relationship between Obama and Netanyahu could hinge on the outcome of Mitchell’s mission. He last visited a month ago, just before Obama hosted Netanyahu at the White House.

The fate of Jerusalem lies at the heart of the conflict.

The Palestinians want East Jerusalem as the capital of a future Palestinian state and fear a proliferation of Israeli settlements will strip them of land needed to achieve that.

Israel regards all of Jerusalem as its capital, a claim not recognised internationally. The United States has urged Israel not to take steps that could predetermine the city’s future.

Agreement by Netanyahu to curb Jerusalem settlement could heal a split with Obama that has raised fears among Israelis that strategic cooperation with Washington could suffer at a critical juncture in efforts to thwart Iran’s nuclear ambitions.

But it also could open cracks in Netanyahu’s governing coalition, dominated by pro-settler parties, including his own.

“We hope (Mitchell) will have the right formula for resuming proximity talks by having Israel stop settlement activities,” Palestinian chief negotiator Saeb Erekat said.

In a sign of increasing U.S. frustration, Obama’s national security adviser, Jim Jones, put both sides on notice in a speech on Wednesday that Iran was “cynically” using their conflict to divert attention from its nuclear programme.

The diplomatic deadlock has also boosted the Palestinian Islamist group Hamas. It spurns the Jewish state and broke with Abbas in 2007 to seize control of the Gaza Strip. Israel has conditioned any peace accord on Abbas first curbing Hamas.

Mitchell may stay in the region for a second round of meetings over the weekend, Crowley said.

He said U.S. Secretary of State Hillary Clinton spoke briefly to Abbas by phone on Thursday “just to affirm that he felt comfortable that the meetings should go forward” and that Abbas answered yes.

(Additional reporting by Ali Sawafta in Ramallah, Ari Rabinovitch, Allyn Fisher-Ilan and Dan Williams in Jerusalem and Andrew Quinn in Washington, Editing by Alison Williams)