Dozens of Israeli companies signed contracts with the Palestinian Authority to work in developing the new Palestinian city of Rawabi, in which they agreed to refrain from using materials from Israeli suppliers based in West Bank settlements, east Jerusalem and the Golan Heights, Army Radio reported on Tuesday.

Right-wing politicians responded angrily to the report, objecting to the fact that Israeli companies would contribute to the boycott of fellow Israeli companies.

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In response Peace Now Secretary-General Yariv Oppenheimer criticized the right wing politicians saying, "if the Palestinians want to build their country without the assistance of the settlements and their products it is completely legitimate.

"The production of goods by the settlements transforms all Israeli products to illegitimate," he added.

Rawabi is a planned Palestinian city north of Ramallah being built from scratch with a combination of Palestinian and international funds.

The contract signed by the unnamed Israeli companies and obtained by Army Radio said that the company was responsible for ensuring that supplies and services did not originate in Israeli settlements.

"For the purposes of this agreement the term 'settlement' shall mean: any community, or body of people, or any commercial, industrial, military, quasi-military, and/or construction community and/or site and/or location, whether populated or not, partially and/or completely located on territories (or any part thereof) that were occupied by the State of Israel during the June 1967 Arab-Israeli War," the contract stated. "Such territories shall include but not be limited to, Occupied East Jerusalem, Occupied West Bank, Occupied Gaza Strip, Occupied Golan Heights, or any parts thereof."

Chairman of the Council of Jewish Communities in Judea and Samaria, Danny Dayan, said in an Army Radio interview that any Israeli company agreeing to sign such a contract should be boycotted.

"Dozens of operators are willing to sign this clause, to call our capital 'Occupied Jerusalem' in order to earn a few bucks from the Arabs," Dayan said. "The names of these companies should be revealed.," he added.

In response to the report, MKs Ze'ev Elkin and Aryeh Eldad said that they plan to draft a bill that would outlaw Israelis from boycotting other Israelis.

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