An Israeli minister has warned of punitive action if the Palestinians pursue efforts to join UN agencies, as hopes of a breakthrough in the US-led peace process faded rapidly.
In a surprise announcement late on Tuesday, Palestinian President Mahmoud Abbas said he had begun steps to join 15 UN agencies, angering Israel and prompting US Secretary of State John Kerry to cancel an imminent trip to Ramallah.
The announcement was a major blow to Kerry's frenetic efforts to resolve a dispute over Palestinian prisoners and find a way to extend the fragile peace talks beyond an April 29 deadline.
The US diplomat had left Israel several hours earlier after a lightning visit during which he met twice with Israeli Prime Minister Benjamin Netanyahu to discuss what a source close to the talks said was a proposal that could have resolved the prisoner issue and ensured the continuation of the peace process into 2015.
Under terms of an agreement which brought about a resumption of peace talks in July 2013, Israel had pledged to free 104 veteran Palestinian prisoners in four tranches, and in exchange, Ramallah had pledged to freeze all moves to seek membership in UN organisations.
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But a crisis erupted at the weekend when Israel refused to release the final 26 prisoners, enraging the Palestinians who on Tuesday responded by resuming their approach to UN agencies.
Speaking in Brussels, Kerry said he would not return to the region as planned on Wednesday, but reserved judgment on the situation, urging both sides to demonstrate restraint.
"It is completely premature tonight to draw ... any final judgment about today's events and where things are. This is a moment to be really clear-eyed and sober about this process," he told reporters.
"My team is on the ground meeting with the parties even tonight," he said.
"We urge both parties to show restraint."
Abbas's announcement drew an angry response in Israel where a hardline cabinet minister warned it would cost the Palestinians dearly.
"If they are now threatening (to go to UN institutions), they must know something simple: they will pay a heavy price," Tourism Minster Uzi Landau told public radio, suggesting Israel could respond by annexing parts of the West Bank.
"One of the possible measures will be Israel applying sovereignty over areas which will clearly be part of the State of Israel in any future solution," he said, also warning the government could move to "block financial aid" to Ramallah.
A government official, who would not be named, said Abbas's announcement had thrown everything up in the air.
"Is this Israel's partner? Is this a partner for peace?" he asked.
"Everything has changed now, is there even a deal now? We don't know," he said, referring to the proposal which was being discussed with Kerry.
Explaining the move, Abbas said the decision to seek membership in 15 UN agencies, beginning with the Fourth Geneva Convention, was the Palestinians' right and not an act of defiance against Washington.
"We aren't acting against the United States, nor against any other party," Abbas said at a televised press conference.
"It is our right."
The Palestinians had repeatedly threatened to resume their action through international courts and the UN over Israel's settlement expansion on occupied territory in the West Bank and in annexed Arab east Jerusalem.
Earlier on Tuesday, Israel had published tenders for more than 700 homes in east Jerusalem in a move slammed by rights groups as provocative.
