Israel has angrily rejected new guidelines from the European Union barring member states from providing financial aid to Israeli settlements in the occupied Palestinian territories.
The new restrictions mean that all funding, scholarships and co-operation from the EU to individuals or organisations in the Israeli settlement zones will cease from next year.
Laura Murphy-Oates has the details.
The guidelines require that in all signed agreements with EU states, a clear distinction must be made between Israel and the territories occupied by the Jewish state in the 1967 Six-Day war.
This refers to the Golan Heights, the Gaza Strip and the West Bank - including mainly-Arab east Jerusalem.
From next year, only territories within the 1967 borders will be considered eligible for EU funding.
EU representative Maya Kocijancic says the idea is to make a distinction between Israel and the territories it occupies.
"These guidelines were prepared in order to implement the Commission's commitment to make a clear distinction in relevant legislation between the state of Israel and the occupied territories."
Prime Minister Benjamin Netanyahu describes it as external interference with Israel's borders.
He says the EU should be focusing its efforts elsewhere.
"I would expect from those who really want peace and stability in the region to discuss this issue after they solve problems that are slightly more urgent in the region. Like the civil war in Syria or Iran's race to obtain nuclear weapons. As Prime minister of Israel I will not let hundreds of thousands of Israelis living in Judea and Sumeria in the Golan Heights and in Jerusalem our united capital be harmed. We will not accept any external dictates regarding our borders."
Palestinian official Hanan Ashrawi has welcomed the EU guidelines, which are in line with international declarations that the Israeli settlements in the occupied territories are illegal.
"This is the beginning of a new era and it seems to me high time. But that Israel should listen very carefully and should understand that this occupation cannot continue without any kind accountability and with nothing but profit for Israel and nothing to lose. It is time that the whole world treats the Israeli occupation this way and it is time that Isreal reaches the conclusion that is has to leave the Palestinians alone."
Direct peace talks between Israel and the Palestinians have been on hold for nearly three years.
The Palestinians have been refusing to negotiate until certain terms are met.
These include a freeze on settlement activity and Israel's acceptance of the borders in place before the 1967 war.
Professor Ben Saul of the University of Sydney says the illegality of the Israeli settlements in international law has long been clear.
"Under the Geneva Conventions of 1949 transferring Israel's citizens or population in to the occupied territories is clearly illegal, It is also regarding as a war crime under the statute of International Criminal Court since 1998. The International Court of Justice has said that the settlements are illegal."
Professor Saul says he's not surprised that Israel has reacted angrily to the new EU guidelines.
"It's really consolidating the position that the European Union has taken for quite some time now. But I think this is concretising what the European Union has said and done and that's why I think Israel is regarding this as more provocative."
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