MOSCOW, Mar 19 (Reuters) - Middle East mediators from Europe, the United States, Russia and the UN met on Friday seeking to defuse the latest crisis in peace efforts between Israel and the Palestinians.

All of us today hope to arrive at some common conclusions which will help to promote the beginning of a dialogue between the two sides, Russian Foreign Minister Sergei Lavrov said at the start of talks.

But the meeting of the Middle East quartet of peace mediators in Moscow was overshadowed by a serious row over Israel's plans to expand settlements in occupied East Jerusalem and an upsurge in violence in the Gaza Strip.

Relations between Washington and Israel have been frayed by Israel unveiling plans for 1,600 fresh housing units in disputed territory during a visit by US Vice President Joe Biden last week.

The Palestinians, who regard the land as part of their future capital, say they will not go ahead with plans for indirect peace talks unless the housing scheme is scrapped.

US Secretary of State Hillary Clinton, in Moscow for the quartet meeting, discussed steps to improve the outlook for Israeli-Palestinian peace by telephone with Israeli Prime Minister Benjamin Netanyahu on Thursday.

Netanyahu's spokesman Nir Chefetz said the Israeli leader had proposed some mutual confidence-building steps that both Israel and the Palestinians could take in the West Bank. He declined to spell these out.

Clinton met her Russian counterpart Lavrov, UN Secretary General Ban Ki-moon, EU foreign policy chief Catherine Ashton and Quartet Representative Tony Blair over a closed dinner on Thursday evening before Friday's formal meeting.

No details of that meeting were disclosed.

We intend to have a very broad-ranging discussion with our Quartet partners, Clinton said at a joint news conference with Lavrov on Thursday. Our goals remain the same. It is to re-launch negotiations between the Israelis and the Palestinians on a path that will lead to a two-state solution.

The Quartet was formed in 2002 in Spain to assist in mediating an end to escalating violence in the Israeli-Palestinian conflict. It last met on the margins of the U.N. General Assembly in September.

But its results so far have been meager, leading some analysts to dismiss it as an expensive club for diplomats.
Moscow had originally hoped to organize a full-scale international conference on the Middle East this year but the lack of progress on Israeli-Palestinian peace talks has forced Russia to settle instead for hosting a quartet meeting.