RAMALLAH, Jan 12, (Ali Sawafta/Reuters) - Palestinian Prime Minister Salam Fayyad rejected Israeli accusations that he had incited hostility to the Jewish state, saying on Tuesday that Israel had made the claims to dodge its own obligations under a peace plan.

Fayyad's comments, to a gathering of businessmen in Ramallah, came on the day that U.S. President Barack Obama's national security adviser Jim Jones arrived in Israel as part of Washington's bid to relaunch peace talks.

Israel has complained to the United States, sponsor of the 2003 road map plan for Middle East peace, about both Fayyad and Palestinian President Mahmoud Abbas, saying they had breached obligations under the plan to end such incitement.

This is clearly part of a systematic effort to isolate us internationally, said Fayyad, a former World Bank economist who enjoys wide support among Western governments.

Under the road map, Israel was required to freeze all settlement activity in occupied lands where the Palestinians seek to establish an independent state. Both sides agreed to end incitement to hostilities.

Abbas reiterated on Tuesday that any resumption of talks is conditional on a full halt to settlement building in the West Bank and East Jerusalem -- a position that has frustrated U.S. efforts to restart the peace talks which have stalled for more than a year. A partial, temporary freeze Israel announced in November is insufficient, Abbas has said.


PAINFUL HISTORY

Israel has long accused the Palestinian Authority of both encouraging and failing to condemn attacks on Israel, particularly under Abbas's predecessor, Yasser Arafat, who died in 2004.

Abbas and Fayyad say that cooperation between new, Western-trained Palestinian forces and Israel means much of that criticism is now misplaced, a view echoed by Western diplomats.

However, Israelis have complained that Abbas recently endorsed honouring a Palestinian who led a 1978 bus hijacking in which more than 30 people were killed.

And Fayyad drew Israel's ire by condemning the killing by Israeli troops in the West Bank last month of three men accused of killing a Jewish settler, calling them martyrs and describing their deaths as assassinations.

Prime Minister Benjamin Netanyahu on Sunday called on Abbas to stop incitement against Israel in the media and schools.

Sadly, there has been a retreat in this area in recent months, both within the Palestinian Authority and by its leaders, he said.

These serious actions represent a harsh violation of the Palestinians' international obligation to prevent incitement. This is not how peace is made. (Writing by Erika Solomon, editing by Tom Perry and Robin Pomeroy) (For blogs and links on Israeli politics and other Israeli and Palestinian news, go to http://blogs.reuters.com/axismundi)