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Group claims Israel pushing ahead with east Jerusalem construction as talks with Palestinians falter

April 2, 2014 / 7:04 AM EDT / CBS/AP

JERUSALEM -- A settlement watchdog group says Israel is pushing forward with plans to build more than 700 homes in a Jewish enclave of east Jerusalem.

The move could present another obstacle in the deeply troubled Israeli-Palestinian negotiations.

Hagit Ofran from Peace Now says Israel renewed a call for contractor bids to build the homes this week.

Ofran said Wednesday that Israel's reissuing of 708 tenders was meant to "make problems" in the faltering Israeli-Palestinian talks.

Peace talks stalled 05:28

Those talks suffered yet another setback this week as Secretary of State John Kerry cancelled plans to return to the region after Israeli and Palestinian leaders made it clear no diplomatic breakthrough was near on the horizon.

Israel was supposed to release 26 Palestinian prisoners this past weekend, but asked for an extension on the deadline.

Palestinian President Mahmoud Abbas balked at the request and resumed a campaign for further international recognition of a state of Palestine, despite a promise to suspend such efforts.

The claim about further construction in east Jerusalem - which Palestinians want to be the capital of a future Palestinian state -- came amid speculation that the U.S. was discussing a deal to entice Israel into making greater concessions in the dialogue with Palestinians by setting free a man convicted of spying for the Jewish state who has been held in a U.S. prison for 29 years.

Israel has long sought the release of former U.S. Navy intelligence officer Jonathan Pollard, who leaked classified documents to Israel in 1985.

Convicted spy Jonathan Pollard, seen during a 1998 interview at the Federal Correction Institution in Butner, N.C. AP

Asked Tuesday in Brussels by CBS News' Margaret Brennan whether the U.S. had offered to release Pollard early, Secretary of State John Kerry said, there was "no agreement at this point in time regarding anyone or any specific steps. There are a lot of different possibilities in play."

CBS News foreign affairs analyst Pamela Falk said the cancellation of Kerry's visit to the Middle East does not necessarily mean the talks are off.

"Negotiations are on when everyone is putting more on the table," she explained, noting that both sides did at least seem interested in discussing possible ways forward. "But the Middle East is always difficult."

Brennan reported that Kerry was making calls Wednesday to Mideast negotiators who are trying to revive the process. With more than a dozen trips to the region in the past months, Kerry remains committed but appears no closer to a deal than any of his predecessors.

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