Netanyahu also claimed that bad press regarding Israeli construction in the West Bank harms current diplomatic efforts aimed at halting Iran's nuclear ambitions.
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Addressing the Knesset in a special session focusing on the housing crisis currently facing Israel, Netanyahu said continued economic pressure on Iran was the best alternative to two other options, which he described as a bad deal and war.
"I would go so far as to say that a bad deal could lead to the second, undesired option," he said, referring to war.
The prime minister further noted that Housing Minister Uri Ariel's plan to build 23,000 housing units in the West Bank creates "unnecessary clashes with the international community – at a time when we are making an effort to convince the international community to reach a better agreement with Iran."
"In recent months we have been building and have offered numerous tenders for thousands of housing units," the prime minister said, adding "it wasn’t easy, but it never is. Nonetheless we did it responsibly, as we have been doing for the last four years, standing in the face of international pressure."
Hinting criticism at Ariel, Netanyahu further said "there is no need to take additional steps which are unpractical and testify to a theoretical potential in building, it creates friction with the international community. (Minister Ariel's plans) are unfeasible and are not part of any real process. We need to fight for something real, practical and legal."
Regarding the move's timing, Netanyahu said that "at this time it is especially pointless wasting efforts, energy and expensive political clout for something that has no real world implications and in my opinion, harms settlement. We need to fight for those things that yield real results."
On Tuesday, according to a PMO statement, Netanyahu slammed Ariel for "circulating the plan without coordination."
Regarding Iran, Netanyahu said that "Iran is under serious economic pressure, those exerting the pressure are currently at an advantage. We can ge a better deal at neutralizing Iran's military nuclear capabilities, and this something that was not achieved in Geneva," the prime minister said.
Across the pond
A day after leveling unprecedented criticism at Israel's constructions plans, the White House praised Netanyahu for his response.
In a statement, White House Spokeswoman Bernadette Meehan said: “We welcome the news that Prime Minister Netanyahu ordered the Housing Ministry to stop the planning tenders. As we said yesterday: Our position on settlements is quite clear. We consider now and have always considered the settlements to be illegitimate. We have called on both sides to take steps to create a positive atmosphere for the negotiations. We do not consider settlement planning, even in its early stages, to be a step that creates a positive environment for the negotiations.”
Meanwhile, US President Barack Obama faced a mirror image situation to that of Netanyahu's, in which he pleaded with lawmakers to give him more time to negotiate with Iran before voting on new sanctions which could further hinder negotiations with Iran.
However, the White House faced sharp resistance from Republican and Democratic lawmakers determined to further squeeze the Iranian economy and wary of yielding any ground in nuclear negotiations.
Back from a week of nuclear talks in Geneva and tense consultations with nervous Middle East allies, Secretary of State John Kerry was to join Vice President Joe Biden in presenting the administration's case to their ex-colleagues in the Senate on Wednesday and ask them to hold off on a package of new, tougher Iran sanctions under consideration.
A House committee, meanwhile, held a hearing to vent its frustration with Kerry and an Obama administration they believe should adopt a far tougher line with Tehran.
"The Iranian regime hasn't paused its nuclear program," said Rep. Ed Royce, the Republican House Foreign Affairs Committee chairman. "Why should we pause our sanctions efforts as the administration is pressuring Congress to do?"
Kerry and top US nuclear negotiator Wendy Sherman hope to persuade members of the Senate Banking Committee in their meeting Wednesday to hold off on additional punitive measures on the Iranian economy.
Yitzhak Benhorin, Reuters and the Associated Press contributed to this report
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