PLO fights for its capital in Jerusalem

Israel and the Palestine Liberation Organisation are locked in a new and escalating conflict over the future of Jerusalem. It centres on the Palestinians' determination to bolster their institutions in the city, in order to ensure that east Jerusalem becomes the de facto capital of Palestinian territory.

Since Israel captured Arab east Jerusalem from Jordan in 1967, it has been building Jewish settlements there in order to create 'facts on the ground'. The Palestinians are effectively challenging Israel at its own game. Israel has plans for three new Jewish settlements inside Arab east Jerusalem's municipal boundaries.

Palestinians cannot retaliate by building as they have lost most of their land, and their building rights are restricted. But their institutions, enfeebled though they are, provide a significant political foothold in east Jerusalem.

Many of these institutions have existed since the beginning of the peace process, say the Palestinians, and their continuation does not breach the Jerusalem status quo. But there is a Palestinian strategy to build them up and create new ones.

Among the Palestinians' most controversial 'ministries' being developed is a planning ministry, which has been set up to produce a masterplan for the West Bank including east Jerusalem. While the temporary limited autonomy in Gaza and Jericho is to be administered by Palestinian ministries based in those towns, the Palestinians are insisting that shadow ministries for all autonomy departments be based in Jerusalem. These will oversee services when autonomy is extended to the rest of the West Bank, and act as forerunners to a Palestinian government based in east Jerusalem.

The Israeli government argues that under the Oslo accords the question of Jerusalem is not to be discussed for another two years, and the Palestinians have no right to try to create an administrative centre in the city.

'We cannot allow the Palestinians to make a capital as a fait accompli before negotiations begin,' said Yossi Beilin, Israel's dovish deputy foreign minister, yesterday.

Israel is threatening to clamp down on activities in Orient House, where Palestinians greet foreign dignitaries and which is the nearest institution the Palestinians have to a government.

Israel has ordered Yasser Arafat, the PLO chairman, to move all his ministries to Jericho. Mr Arafat is also expected to be barred from visiting Jerusalem when he makes his first visit to the self-rule enclaves later this month.

Lawyers in the Israeli Foreign Ministry are studying new legal measures that will outlaw any activity related to self-rule carried out by Palestinian institutions in Jerusalem.

In recent weeks, several of the institutions have reported Israeli harassment. Workers in the Arab Studies Centre, a section of Orient House, who live in the West Bank, have been refused permission to cross check-points into Jerusalem.

Palestinian leaders are pressing their case with the international community and private investors, that there is no economic sense in 'fencing off' east Jerusalem from its West Bank hinterland.