"We had a very frank and open, direct discussion about this question of settlements," Kerry told reporters in Brasilia during a visit to Brazil's capital. The new building plans are for areas that "many people have the perception" will be part of Israel after a negotiated treaty setting boundaries for a Palestinian state, Kerry said.
Netanyahu "has specifically agreed not to disturb what could be the potential for peace going forward," Kerry said at a joint news conference with Brazilian Foreign Minister Antonio Patriota. "We still believe it would be better not to be doing it, but there are realities within life in Israel that also have to be taken into account."
Palestinian Authority President Mahmoud Abbas "understood that coming into these talks," Kerry said. The top U.S. diplomat also spoke to Abbas about the peace process, according to the official Palestinian news agency, Wafa.
Israel announced on Aug. 11 plans to build almost 1,200 homes in Jewish settlements. The last round of peace talks stalled in 2010 when Netanyahu declined to extend a settlement moratorium.
Release of the prisoners was a concession that Palestinians sought to get peace talks moving, and those moved Tueday night were the first among 104 prisoners Israel agreed to set free.
Israel's highest court upheld the government's decision to release the prisoners, most of whom were convicted of murder and held for at least 20 years. Relatives of people killed by the prisoners had asked the court to block the release.
While the prisoner release was a gesture intended to help revive talks after a three-year impasse, Israel complicated the U.S.-led negotiations by announcing plans for settlement construction.
"We oppose settlements taking place at any time, not just the time of the peace process," Kerry said during his trip to Brazil.
Palestinians say Israeli construction in the battle-won West Bank and east Jerusalem is a war crime that violates the Fourth Geneva Convention. Israel says the settlements don't fall under the convention because the territory wasn't recognized as belonging to anyone before the 1967 war, in which Israel prevailed, and therefore isn't occupied.
Housing Minister Uri Ariel announced on Aug. 11 that the government would solicit bids for construction projects in the two territories, which the Palestinians see as the core of a future state. "No country in the world takes orders from other countries about where it can and cannot build," Ariel said.
Israeli Finance Minister Yair Lapid said the settlement construction plans were "unhelpful" to peace efforts, highlighting the divisions in Netanyahu's coalition over the issue.
In addition to the plans announced by Ariel, officials have authorized building 900 homes in an east Jerusalem area close to the West Bank town of Beit Jala, Israel's Channel 10 television news reported late yesterday. Netanyahu's office issued a statement in response, saying the apartments were still in the planning stage and previous Israeli administrations have built housing in the same area.
"It's understood that in any future arrangement, this area is going to remain part of Israel," according to the statement, which cited the prisoner release as proof of the government's "serious intentions" and commitment to the peace process.
Palestinians perceive the new settlement construction as a sign of bad faith. "By announcing new bids every day and every week, Israel is out to destroy the negotiations before they start and destroy the principle of the two-state solution," chief Palestinian negotiator Saeb Erekat said.
Israel captured east Jerusalem and the West Bank from the Jordanians in the 1967 Middle East war, then annexed east Jerusalem in a move that is not internationally recognized. The U.S., United Nations and European Union consider settlement construction an obstacle to peacemaking, and the Palestinians had refused for three years to negotiate while the construction went on.
Abbas scored a domestic victory in the run-up to the talks by securing the release of some of the thousands of prisoners Israel holds. Because many Palestinian families have had a relative in an Israeli prison at some point, the release of inmates is a priority for Palestinian leaders. The 104 inmates are to be released in four rounds.
The Palestinian president was planning an overnight celebration for the first prisoners returning to homes in the West Bank at his Ramallah headquarters, Palestinian Prisoner Affairs Minister Issa Qaraqa said. Some of the prisoners will go to the Hamas-ruled Gaza Strip after they are freed.
The planned release ignited two days of protests by victims' relatives outside the Defense Ministry in Tel Aviv. Of the 26 to be freed, 21 were convicted of homicide, with the rest imprisoned on charges of attempted murder or kidnapping, according to the list.
Ferziger reported from Tel Aviv. Contributors: Calev Ben-David and Fadwa Hodali in Jerusalem.