JERUSALEM (Reuters) – U.S. Secretary of State Condoleezza Rice called on Israel on Tuesday not to undermine peace negotiations with the Palestinians after a report found it had nearly doubled Jewish settlement construction.

On her seventh visit this year in a long-shot push for a peace deal by January, Rice said the two sides were “somewhat closer” in their secret talks despite deep public skepticism about the chances of ending the six-decade conflict.

Israel’s Peace Now group, citing data from the Central Bureau of Statistics, said construction had begun on more than 443 structures in settlements in the occupied West Bank since January compared with 240 starts in the same period in 2007.

At a news conference with Israeli Foreign Minister Tzipi Livni, Rice reiterated her long-standing criticism of settlement building.

“I think it’s no secret, and I have said it to my Israeli counterparts, that I don’t think that settlement activity is helpful,” Rice said.

“In fact, what we need now are steps that enhance confidence between the parties and anything that undermines confidence between the parties ought to be avoided,” she said.

Palestinians say settlement building denies them land they want for a contiguous state. A U.S.-backed peace “road map” calls on Israel to halt all settlement activity in the West Bank and for Palestinians to rein in militants.

Israel has said it plans to keep building in settlement blocs that it wants to keep in any future peace deal with the Palestinians.

Livni said Israeli settlement activity had been reduced “in the most dramatic way,” especially in areas east of the barrier Israel is constructing in the West Bank, a project it terms a security necessity and Palestinians condemn as a land grab.

SETTLEMENT “NOISE”

“The peace process is not, and should not be, affected by any kind of settlement activities,” Livni added, cautioning against allowing what she termed “noise” to derail peace negotiations.

Livni urged the Palestinians not to use settlement building “as an excuse” to avoid negotiations but added she understood “their frustration” at times.

Rice has said she still aims to reach a peace accord by January, when U.S. President George W. Bush leaves office, but she has played down chances of striking any partial accord in time for the September U.N. General Assembly.

“I believe that the parties have succeeded in moving their understandings of what needs to be achieved, and indeed their positions, somewhat closer together,” Rice told the news conference.

But few analysts believe Rice, who saw Israeli Prime Minister Ehud Olmert before meeting Livni, can secure a major breakthrough.

Later in the day she was to hold a three-way meeting with Livni and former Palestinian Prime Minister Ahmed Qurie, the two sides’ lead negotiators, before she was to see Palestinian President Mahmoud Abbas in Ramallah.

Progress towards a peace deal has been hampered by violence, Israeli settlement expansion and political uncertainty in Israel stemming from a corruption scandal that has forced Olmert to announce plans to step down.

Livni is widely regarded as the front-runner in a Kadima party leadership race to replace Olmert, who has said he would resign after his successor is chosen.

Olmert could, however, stay on for months as caretaker prime minister until a new government is formed, although many in Israel doubt that as a lame duck leader he would be able to put a peace deal in motion.