Published by Global Banking & Finance Review®
Posted on August 14, 2025
5 min readLast updated: January 22, 2026
Add as preferred source on GoogleIsraeli Finance Minister Smotrich's new settlement plan aims to divide the West Bank, challenging Palestinian statehood and drawing international condemnation.
By Alexander Cornwell
MAALE ADUMIM, West Bank/TEL AVIV, (Reuters) -Israeli far-right Finance Minister Bezalel Smotrich announced work would start on a long-delayed settlement that would divide the West Bank and cut it off from East Jerusalem, a move his office said would "bury" the idea of a Palestinian state.
The Palestinian government, allies and campaign groups condemned the scheme, calling it illegal and saying the fragmentation of territory would rip up peace plans for the region.
Standing at the site of the planned settlement in Maale Adumim on Thursday, Smotrich, a settler himself, said Prime Minister Benjamin Netanyahu and U.S. President Donald Trump had agreed to the revival of the E1 development, though there was no immediate confirmation from either.
“Whoever in the world is trying to recognise a Palestinian state today will receive our answer on the ground. Not with documents nor with decisions or statements, but with facts. Facts of houses, facts of neighbourhoods," Smotrich said.
Israel froze construction plans at Maale Adumim in 2012, and again after a revival in 2020, because of objections from the U.S., European allies and other powers who considered the project a threat to any future peace deal with the Palestinians.
Restarting the project could further isolate Israel, which has watched some of its Western allies condemn its military offensive in Gaza and announce they may recognise a Palestinian state.
Palestinians fear the settlement building in the West Bank - which has sharply intensified since the 2023 Hamas attack on Israel that led to the Gaza war - will rob them of any chance to build a state of their own in the area.
In a statement headlined "Burying the idea of a Palestinian state," Smotrich's spokesperson said the minister had approved the plan to build 3,401 houses for Israeli settlers between an existing settlement in the West Bank and Jerusalem.
In Maale Adumim, Smotrich told Reuters the plan would go into effect on Wednesday.
Breaking the Silence, an Israeli rights group established by former Israeli soldiers, said what it called a land grab "will not only further fragment the Palestinian territory, but will further entrench apartheid".
Nabil Abu Rudeineh, the Palestinian president's spokesperson, called on the United States to pressure Israel to stop settlement building.
"The EU rejects any territorial change that is not part of a political agreement between involved parties. So annexation of territory is illegal under international law," European Commission spokesperson Anitta Hipper said.
Norwegian Foreign Minister Espen Barth Eide said the move by Smotrich, an ultra-nationalist in the ruling right-wing coalition who has long advocated for Israeli sovereignty over the West Bank, showed that Israel "seeks to appropriate land owned by Palestinians in order to prevent a two-state solution".
HOUSE BUILDING 'IN A YEAR'
Peace Now, which tracks settlement activity in the West Bank, said there were still steps needed before construction. But if all went through, infrastructure work could begin within a few months, and house building in about a year.
“The E1 plan is deadly for the future of Israel and for any chance of achieving a peaceful two-state solution. We are standing at the edge of an abyss, and the government is driving us forward at full speed," Peace Now said in a statement.
Consecutive Israeli governments have initiated, approved, planned and funded settlements, according to Israeli rights group Yesh Din.
Some settlers moved to the West Bank for religious or ideological reasons, while others were drawn by lower housing costs and government incentives. They include American and European dual-citizens.
Palestinians were already demoralised by the Israeli military campaign which has killed more than 61,000 people in Gaza, according to local health authorities, and fear Israel will ultimately push them out of that territory.
About 700,000 Israeli settlers live among 2.7 million Palestinians in the West Bank and East Jerusalem. Israel annexed East Jerusalem in a move not recognised by most countries but has not formally extended sovereignty over the West Bank.
The UN and most world powers say settlement expansion has eroded the viability of a two-state solution by fragmenting Palestinian territory. The two-state plan envisages a Palestinian state in East Jerusalem, the West Bank and Gaza, existing side by side with Israel.
Israel cites historical and biblical ties to the area and says the settlements provide strategic depth and security.
Most of the global community considers all settlements illegal under international law.
Israel rejects this interpretation, saying the West Bank is "disputed" rather than "occupied" territory.
Britain, Canada, Australia and New Zealand imposed sanctions in June on Smotrich and another far-right minister who advocates for settlement expansion, accusing both of them of repeatedly inciting violence against Palestinians in the West Bank.
(Additional reporting by Gwladys Fouche in Oslo, Ahmed Elimam in Dubai and Charlotte Van Campenhout in Brussels; Writing by Michael Georgy; Editing by Andrew Heavens)
A Palestinian state is a proposed sovereign state for the Palestinian people, envisioned to exist alongside Israel, primarily in the West Bank and Gaza Strip.
International responses to settlement plans often include condemnation from various countries and organizations, viewing them as illegal under international law and a barrier to peace.
The legal implications of settlement expansion can include accusations of violating international law, particularly regarding the rights of the Palestinian people and the potential for annexation.
Settlements can fragment Palestinian territory, complicating negotiations for peace and undermining the viability of a two-state solution.
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