The United States' top diplomat is on a new peace mission, visitingIsrael and the Palestinian territories. Robert Berger reports from theVOA bureau in Jerusalem.

Palestinian President Mahmoud Abbas, right, meets US Secretary of State Condoleezza Rice in the West Bank city of Ramallah, 15 Jun 2008

Secretary of State CondoleezzaRice is meeting Israeli and Palestinian leaders as the United Statescontinues to push for a peace agreement by the end of the year. Shereacted angrily to Israel's announcement that it plans to build13-hundred new homes in disputed East Jerusalem, on land thePalestinians claim for their future capital. That brings to more thanthree-thousand the number of homes Israel has approved for constructionin East Jerusalem and the West Bank since peace talks resumed inDecember.

"I am very concerned that ata time when we need to build confidence between the parties, thecontinued building and the settlement activity has the potential toharm the negotiations going forward," said Rice.

Israelsays it has the right to build anywhere in Jerusalem because it willremain the capital of the Jewish state in any final peace agreement.

Inaddition to the settlements, gaps are wide on other core issues such asPalestinian refugees and the status of Jerusalem. Both sides haveexpressed doubt about meeting the U.S. goal of a peace agreement beforePresident Bush leaves office in January.

Another complication is a corruption scandal that could topple Israeli Prime Minister Ehud Olmert from power.