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The British Foreign Office has confirmed that it has pulled out of talks to move the British Embassy in Tel Aviv to a building owned by Africa-Israel Investments, because of the company's role in West Bank construction.
The British Embassy was in negotiations with Africa-Israel, the international corporation owned by Lev Leviev, to move from its current location to the Hakirya Tower.
"We can confirm that we have withdrawn from negotiations on a lease for the Hakirya Tower premises in Tel Aviv," a Foreign Office spokesperson in London told The Jerusalem Post. "This decision follows discussions with Africa-Israel about our concerns of involvement in settlement activities by Africa-Israel and its subsidiary companies."
The spokesperson said that this was something the British government took very seriously.
"The UK government's firm stance is that the construction of settlements in the Occupied Palestinian Territories is unlawful under international law; this is an important policy issue for the UK government," the spokesperson said.
This was confirmed by the embassy in Tel Aviv, which said the British ambassador, Tom Phillips, had made the decision last month.
"The fact that we have withdrawn from these negotiations reflects the fact that our discussions with Africa-Israel did not satisfy our concerns regarding settlements," said Karen Kaufman, a spokesperson for the British Embassy.
"The decision was made even though Africa-Israel recently sold 51 percent of its interest in the building, as they still have a remaining stake.
"The UK government has always regarded settlements as illegal, but what has happened in recent months is that we are looking for ways to make a difference on this issue," Kaufman said. "We see them as an obstacle to peace."
Kaufman said that the search for a new location for the embassy would continue.
"We shall of course continue to explore solutions to ensure that we have suitable embassy premises in Tel Aviv," she said.
The embassy's plans were first reported by Globes, the business newspaper, in September. When the news broke it generated a huge protest in the UK by pro-Palestinian groups, who argued that one of the company's subsidiaries was prominent in settlement building and that Leviev was a big contributor to the Land Redemption Fund, which, they claimed, acquired Palestinian land for Jewish settlements.
A subsidiary of Africa-Israel, Danya-Cebus, has built homes in at least one settlement, Ma'aleh Adumim, but it is not clear what the scope of the company's activities over the Green Line are.
Africa-Israel said in response that the British Embassy's perception of Danya-Cebus's operations in the West Bank was "fundamentally wrong," but refused to provide any additional details.
It said pro-Palestinian organizations in Britain had long been trying to promote a "biased, one-sided political agenda" against Israeli corporations, businesspeople, academics and researchers.
"It is lamentable that this pressure ends up being vented against Israeli business entities that have no impact whatsoever on the setting of Israel's policy," Africa-Israel said in a statement.
It directed all other inquiries to the Foreign Ministry, which refused to comment.
The United Kingdom does not have dealings with companies based in Jewish settlements and does not offer assistance to British companies seeking to invest over the Green Line.
The British government has also spoken out strongly over produce from Jewish settlements marked as being made in Israel - which allows it to enjoy tariff benefits under an Israel-EU treaty.
AP contributed to this report.