By MARK LANDLER and JODI RUDOREN
BETHLEHEM, West Bank — Secretary of State John Kerry, seeking to quell a dispute over Jewish settlements that threatens to poison peace talks between Israel and the Palestinians, pressed the Israeli government on Wednesday to limit its approval of new construction.
Mr. Kerry’s efforts to steady the talks got off to a bumpy start, with the Palestinians seething over recent building announcements and Prime Minister Benjamin Netanyahu of Israel bluntly criticizing Palestinian leaders for inciting trouble and evading tough decisions.
The prime minister’s comments, which came days after the Palestinian Authority president, Mahmoud Abbas, lamented the lack of progress, underscored the depth of the challenge facing Mr. Kerry as he tries to prevent the latest round of talks from slipping into a familiar cycle of recrimination.
Adding to the potential hurdles for diplomacy was the acquittal Wednesday on corruption charges of Israel’s former foreign minister, Avigdor Lieberman, whose hard-line views and polarizing style could disrupt the talks. Mr. Lieberman, who is expected to return to the foreign minister’s post, has said he views a peace deal with the Palestinians as being “decades away.”
Mr. Kerry, who thrust himself back into the talks to recapture momentum, instead found himself dealing with anger on both sides. Under pressure from Mr. Abbas, he declared that the Palestinians had not agreed to the continued building of settlements in the West Bank as a condition for resuming direct negotiations with the Israelis.
“That is not to say that they weren’t aware, or we weren’t aware, that there would be construction,” Mr. Kerry said here after meeting Mr. Abbas. “But that construction, importantly, in our judgment, would be much better off limited as much as possible in an effort to help create a climate for these talks to be able to proceed effectively.”
In Jerusalem, Mr. Netanyahu aired his dissatisfaction with the state of the talks even before the start of his meeting with Mr. Kerry, saying, “I see the Palestinians continuing with incitement, continuing to create artificial crises, continuing to avoid, run away from the historic decisions that are necessary to make a genuine peace.”
At the heart of the current tempest is whether the Palestinians accepted that Israel would announce new settlement construction as it released Palestinian prisoners. The Israelis say it was understood; the Palestinians reject that. On Tuesday, officials said, the dispute led to a shouting match between Israeli and Palestinian negotiators.
Some analysts said that the public display of outrage by Palestinian leaders, including an offer of resignation last week by the chief negotiator, Saeb Erekat, was more likely about appeasing the Palestinian street than a reflection of what is happening inside the negotiating room. But that need to show steadfastness, on both sides, is a hint of the broader hurdles Mr. Kerry faces in bridging the significant gaps.
For his part, Mr. Kerry professed to be undaunted. “There are always difficulties, always tensions,” he said. “I’m very confident of our ability to work through them. That’s why I’m here.”
Standing in a sun-splashed square next to the Church of the Nativity, Mr. Kerry announced that the United States would contribute an additional $75 million in aid to a Palestinian Authority fund to build roads, hospitals and schools in the West Bank — a program that is designed to create jobs and build Palestinian support for the peace process.
Anat N. Kurz, director of research at the Institute for National Security Studies in Tel Aviv, said the statements by Mr. Netanyahu and Mr. Abbas, as well as a series of negatives leaks, indicated the talks were at a nadir. But that, she said, could present Mr. Kerry with an opening.
“If I want to be optimistic, I would say that in the face of the crisis, maybe the administration will step in,” said Ms. Kurz, whose current research focuses on the conflict. “That would force the two sides to come up with something realistic.”
Still, Palestinian leaders continued to accuse Israel of sabotaging the talks with leaks and settlement announcements, and they have taken strong positions on core issues that make a deal seem like a distant dream. Nimr Hamad, a political adviser to Mr. Abbas, said on Voice of Palestine radio that “any proposal that doesn’t include full withdrawal from East Jerusalem” — something Mr. Netanyahu has said will never happen on his watch — means “there will not be a peace agreement.”
Wasel Abu Yousif, a member of the Palestine Liberation Organization’s executive committee, said Mr. Abbas planned to tell Mr. Kerry that “we can’t continue with the negotiations with what Israel is doing” with settlements, and that continued construction would lead the Palestinians to pursue sanctions against Israel in international forums.
In his remarks, Mr. Netanyahu made clear that he viewed nuclear talks with Iran, which resume Thursday in Geneva, as his top priority. He called for the United States and other major powers to tighten, not reduce, sanctions against Iran while the talks are underway.
Mr. Kerry repeated his pledge that the West would not make a bad nuclear deal with Iran, saying no deal was preferable. Some analysts said the parallel negotiations could strengthen Mr. Kerry’s hand to the extent that he is able to use pledges of American resolve on Iran to entice Mr. Netanyahu into making concessions in the peace talks.
But there is little sign of that, and the return of Mr. Lieberman to the government raises questions about whether Mr. Netanyahu will instead take a harder line in the negotiations with the Palestinians.
“The sense of urgency is less acute than it was,” said Itamar Rabinovich, a former Israeli ambassador to the United States. “I’m not saying negotiations are doomed to fail; I’m saying I’m not surprised that there is no progress. It definitely will take more time and will require not just tenacity but also ingenuity on the part of the secretary of state.”