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Yahoo! My Yahoo! Mail Yahoo! Search Search: Sign InNew User? Sign Up News Home - Help Navigation Primary Navigation Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Secondary Navigation Africa Europe Latin America Middle East North America Search Search: Israel says foreign jihadists are in Gaza By STEVE WEIZMAN,Associated Press Writer AP - 1 hour 40 minutes ago JERUSALEM - The head of Israel's Shin Bet internal security service says foreign nationals linked to the global jihadist movement have infiltrated the Gaza Strip. ADVERTISEMENT Service chief Yuval Diskin told ministers at Sunday's meeting of the Israeli Cabinet that there had been "a steady trickle into Gaza of foreigners linked to global jihad," according to an official present at the closed-door meeting. Diskin did not elaborate or cite evidence. Gaza's Hamas interior minister Fathi Hamad dismissed Diskin's charge as "baseless propaganda." The militant group Hamas controls the West Bank. He added that "there is no al-Qaida or any other organization in Gaza." THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below. JERUSALEM (AP) _ Israel on Sunday rejected a U.S. demand to suspend a planned housing project in east Jerusalem, threatening to further complicate an unusually tense standoff with its strongest ally over settlement construction. Israeli officials said the country's ambassador to Washington, Michael Oren, was summoned to the State Department over the weekend and told that a project being developed by an American millionaire in the disputed section of the holy city should not go ahead. Settlements built on captured lands claimed by the Palestinians have emerged as a major sticking point in relations between Israel and the Obama administration because of their potential to disrupt Mideast peacemaking. Although Prime Minister Benjamin Netanyahu recently yielded to heavy U.S. pressure to endorse the establishment of a Palestinian state, he has resisted American demands for an immediate freeze on settlement expansion. On Sunday, Netanyahu told his Cabinet there would be no limits on Jewish construction anywhere in "unified Jerusalem." "We cannot accept the fact that Jews wouldn't be entitled to live and buy anywhere in Jerusalem," Netanyahu declared, calling Israeli sovereignty over the entire city "indisputable." "I can only imagine what would happen if someone suggested Jews could not live in certain neighborhoods in New York, London, Paris or Rome. There would certainly be a major international outcry," Netanyahu said. The international community considers Jewish neighborhoods in east Jerusalem to be settlements and an obstacle to Israeli-Palestinian peacemaking because they complicate a possible division of the city between Israelis and Palestinians. Israel does not regard them as settlements because it annexed east Jerusalem in 1967 after capturing it in June of that year. East Jerusalem is an especially volatile issue because it is the site of key Jewish, Christian and Muslim holy sites. The Palestinians want the traditionally Arab sector of the city to be the capital of their future state. The head of Israel's Shin Bet internal security service, Yuval Diskin, told ministers at Sunday's meeting of the Israeli Cabinet that both the Western-backed administration of Palestinian President Mahmoud Abbas and the militant Islamic Hamas were carrying out "covert activity" in east Jerusalem to stop Jews acquiring property there. An official present at the meeting, speaking on condition of anonymity in line with Cabinet rules, did not elaborate on what the activity entailed but quoted Diskin as saying that hardline Egyptian cleric Sheik Youssef al-Qaradawi had earmarked $25 million to be funneled to Hamas activists in Jerusalem. Al-Qaradawi is a well-known figure in the Arab world and a regular on the satellite Al-Jazeera network. The official said Diskin told the Cabinet that the money was to be used by Hamas to buy apartments and plots of land and "build charitable institutions to broaden its base in the city." He did not provide evidence. Palestinian negotiator Saeb Erekat said Jewish expansion in east Jerusalem jeopardizes peace efforts. "If the Israeli prime minister continues with settlement activities, he will undermine the efforts to revive the peace process," he said. According to Army Radio, the U.S. has demanded that planning approval for the project be revoked. The approval, granted by the Jerusalem municipality earlier this month, allows for the construction of 20 apartments plus a three-level underground parking lot. A spokesman for the U.S. Embassy had no immediate comment. The Palestinians have been encouraged by Washington's insistence that Israel freeze all settlement construction on captured lands in east Jerusalem and the West Bank. Nearly 300,000 Israelis live in West Bank settlements, in addition to about 180,000 Israelis living in Jewish neighborhoods in east Jerusalem. The Palestinians say the Israeli presence makes it increasingly difficult to establish an independent state in these areas. They have refused to restart peace talks until Israel halts all settlement expansion, something the Israeli government has refused to do. The east Jerusalem project is being developed by Irving Moskowitz, an influential supporter of Israeli settlement in east Jerusalem who purchased the Shepherd Hotel in 1985 and plans to tear it down and build apartments in its place. The Jerusalem municipality issued a statement saying the purchase was legal. 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