WASHINGTON: The United States said Monday it is "mindful" of the Palestinian call for Israel to halt settlements, but stopped short of saying it will back such a demand at new peace talks here next month.

In the West Bank town of Ramallah, Palestinian chief negotiator Saeb Erakat warned earlier in the day that Israel must chose between "settlements or peace" when direct negotiations resume in Washington.

In the first direct talks between the two sides in 20 months, Palestinian leader Mahmud Abbas and Israeli Prime Minister Benjamin Netanyahu will meet in Washington on September 2 with US Secretary of State Hillary Clinton.

"The issue of settlements, the issue of the moratorium... has been a topic of discussion and will be a topic of discussion when the leaders meet with Secretary Clinton on September 2," State Department spokesman Philip Crowley said.

When she announced Friday the resumption of the peace talks, Clinton said the negotiations will take place without conditions, or without Israel having to heed the Palestinian call to halt settlements.

In a letter to the European Union, Palestinian president Mahmud Abbas expressed fears about the impact on peace talks if Israel resumes settlements, particularly in East Jerusalem, which is not part of an Israeli moratorium.

It also remains to be seen whether Israel will renew a 10-month moratorium on settlement construction in the West Bank that it imposed in November last year.

"If Mr Netanyahu decides to renew settlement tenders come September 26, he will have decided to stop negotiations," Erakat warned.

Crowley added: "We are very mindful of the Palestinian position."

As negotiations resume, Crowley said, "we expect that both parties will do everything within their power to create... an environment for those negotiations to continue constructively."

The Palestinians want east Jerusalem as the capital of a future state in the West Bank and Gaza Strip. Israel claims all of Jerusalem as its capital.

BDST: 03:20 HRS, August 24, 2010