The Palestinian Authority on Tuesday clarified that when it demands Israel freeze all "settlement" activity, that includes residential building projects in the eastern half of Jerusalem.

"[Israeli Prime Minister Ehud] Olmert has to understand he either declares a full settlement freeze in all occupied areas including East Jerusalem," or there can be no progress toward a final peace agreement, insisted chief Palestinian negotiator Saeb Erekat in an interview with Britain's Guardian newspaper.

Several large Jewish-dominated neighborhoods are situated on the side of Jerusalem previously occupied by Jordan, including the neighborhoods of Ramat Eshkol, French Hill and Gilo. Hundreds of thousands of Israelis live in those neighborhoods.

Olmert and his deputies have already publicly declared their willingness to surrender parts of Jerusalem to the Palestinian Authority, but have stopped short of offering to uproot Jewish neighborhoods. The Palestinians are hoping the Bush Administration's determination to oversee a final Israeli-Palestinian peace deal before the end of its second term will lead to pressure on Israel to meet their demands.