An Israeli building programme planned for East Jerusalem is set to overshadow a meeting between Israeli and Palestinian leaders.
Thursday's summit between Ehud Olmert, the Israeli prime minister, and Mahmoud Abbas, the Palestinian president, is the first since the two agreed to renew peace talks at the US-sponsored Annapolis meeting last month.
The Jerusalem dispute has already clouded earlier meetings between negotiating teams.
Last month, Israel announced tenders for 307 new apartments in Har Homa, part of a ring of settlements built on confiscated Palestinian land in east Jerusalem.
Meanwhile, in the occupied West Bank, Israeli soldiers captured two senior members of the Islamic Jihad group in raids on Thursday, Palestinian security sources and witnesses said.
Israeli troops arrested Mohammad Assayda near Nablus, the Islamic Jihad said.
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