Hoping to placate the right-wing ahead of the release of the first batch of prisoners to kick-start a dialogue with the Palestinians on Wednesday, the Government of Israeli Prime Minister Benjamin Netanyahu has decided to expand controversial settlements in occupied East Jerusalem and the West Bank.

On Sunday evening, the Israeli Government announced the names of 26 prisoners who are slated to be released before talks — stalled since 2010 — commence. A statement from the Prime Minister’s office said that the prisoners would be freed within 48 hours after the Israeli Prison Service published their names.

Out of the 26 prisoners, 20 belonged to the Fatah movement headed by President Mahmoud Abbas, and only six were from rival groups. Fourteen would be returned to Gaza, the stronghold of Hamas, and 12 would head for the Fatah-dominated West Bank.

Under the deal brokered by U.S. Secretary of State John Kerry to revive talks, the Israelis are to free a total of 104 prisoners in four batches; the release being timed with talks that are to culminate in nine months. The dialogue hopes to reach an agreement on establishing the terms of a Palestinian state alongside Israel, including the carving out of a border, determination of security arrangements and the fate of Palestinian refugees displaced by earlier wars. The Palestinians aspire to establish a Palestinian State on territories occupied by Israel in 1967.

Apprehending a right-wing backlash on account of the release of prisoners, Mr. Netanyahu has announced the construction of new homes in areas of East Jerusalem and West Bank that were occupied by Israel during the 1967 war. Mr. Netanyahu has gone ahead with his balancing act, despite most countries designating Israeli settlement activity in the occupied Palestinian territories as illegal.

Around 500,000 Israelis already reside in more than 100 settlements that have been set up in West Bank and East Jerusalem since 1967.

The Netanyahu administration announced on Sunday that nearly 1,200 new apartments would be built in East Jerusalem and the West Bank. Tenders have been floated by Israel's Housing Ministry for 793 new apartments in East Jerusalem and 394 units in the West Bank settlements of Ariel, Efrat, Maale Adumim, and Betar.

Israeli Housing Minister Uri Ariel, a member of the ultranationalist Jewish Home Party, said his country would not succumb to international pressure on construction activity. “No country in the world takes orders from other countries where it can build and where it can't,” said Mr. Ariel in a statement. He promised to “continue to market housing and build in the entire country.”

The Palestinian authorities had earlier called off talks with the Israeli side after it refused to freeze settlements in occupied territories. But the rules of the game had now obviously changed as the Palestinians have decided to continue with the upcoming talks, at least for now, despite Sunday’s announcement by Israel. "If the Israeli government believes that every week they're going to cross a red line by settlement activity, if they go with this behaviour, what they're advertising is the unsustainability of the negotiations," Palestinian negotiator Saeeb Erakat told Reuters.

Mohammad Shtayyeh, a negotiator for the Palestinian Authority, said that Israel "aims through this condensed settlement activity to destroy the basis of the solution called for by the international community, which aims to establish a Palestinian state on the 1967 borders."

In Israel, some influential voices rejected announcement for fresh construction. Israeli Finance Minister Yair Lapid—the generation-next leader of the centrist Yesh Atid party—announced that the decision to call for tenders was "unhelpful to the peace process".

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