JERUSALEM, March 10 (Adam Entous and Jeffrey Heller/Reuters) - An Israeli cabinet minister apologized on Wednesday after Israel embarrassed visiting US Vice President Joe Biden by announcing plans to build 1,600 more homes for Jewish settlers.

Biden condemned the project, whose announcement clouded a mission to Israel that had been focused on reassuring Israelis that President Barack Obama was committed to their security in the face of a possible Iranian nuclear threat.

This should not have happened during a visit by the US vice president, Welfare Minister Isaac Herzog said on Army Radio. This is a real embarrassment and now we have to express our apologies for this serious blunder.

Palestinian officials said the planned construction near Jerusalem could kill any chance of reviving peace talks, which Israel and the Palestinians had agreed this week to restart through U.S. mediation of indirect negotiations.

Chief Palestinian negotiator Saeb Erekat said the settlement project would top the agenda of a meeting Biden was to hold later in the day with Palestinian President Mahmoud Abbas, who would ask him to press Israel to revoke the decision.

Biden kept Prime Minister Benjamin Netanyahu and his wife Sara waiting for 90 minutes at a dinner they were hosting for him and his spouse Jill on Tuesday, after the construction plan was made public.

Aides to Netanyahu said he was caught off-guard by the announcement of the project by the Interior Ministry, run by the ultraorthodox, nationalist Shas party, a main partner in his governing coalition.

I condemn the decision by the government of Israel to advance planning for new housing units, Biden said in a statement issued after he arrived for the meal.

He said the blueprint for Ramat Shlomo, a religious Jewish settlement in an area of the West Bank annexed to Jerusalem by Israel, undermines the trust we need right now and runs counter to the constructive discussions that I've had here in Israel.


FREEZE

Netanyahu ordered in November a 10-month halt to new housing starts in West Bank settlements but exempted those Israel considers part of Jerusalem and projects for Jewish homes in the eastern sector of the city captured in 1967.

Palestinians had called for a total settlement freeze as a condition for resuming peace talks suspended since December 2008.

Messages have been sent to Biden and the Americans that there was no intention to undermine him, a senior Israeli official said. We were genuinely surprised, just as surprised as the Americans.

But Netanyahu took no steps to reverse the decision.

Shas's promotion of the Ramat Shlomo plan was an indication to the Obama administration of the problems Netanyahu would face within his government should he make bold moves, as Washington has demanded, towards a land-for-peace deal with Palestinians.

Palestinians say Jewish settlements in the occupied West Bank could deny them a viable state. Many settlers cite biblical links to the territory, which they call Judea and Samaria.

Israel is not interested in negotiations, nor in peace, Abbas aide Nabil Abu Rdainah told Reuters.

On Tuesday, Netanyahu voiced appreciation for U.S. efforts to secure backing for tougher sanctions against Iran. Neither he nor Biden commented on widespread expectation that the U.S. vice president would ask Israel not to attack Iran unilaterally.

Israel, believed to be the Middle East's only nuclear power, has called for sanctions to cripple Iran's trade in oil and gas. Iran says its nuclear ambitions are for energy only. (Additional reporting by Alastair Macdonald and Ari Rabinovitch in Jerusalem, Mohammed Assadi in Ramallah, Ali Sawafta and Tom Perry in Ramallah, Writing by Jeffrey Heller, Editing by Janet Lawrence)