Washington — The U.S. demand for a settlement freeze includes Jewish neighborhoods in eastern Jerusalem, according to the State Department.
“We’re talking about all settlement activity, yes, in the area across the line,” said State Department spokesman Ian Kelly, in response to a question from the Jerusalem Post about the parameters of settlement stoppage the United States wants from Israel. Kelly’s usage of the term “the line” refers to the Green Line, or pre-1967 armistice border.
Israel does not consider eastern Jerusalem part of the West Bank, although the international community does call housing in that area settlements. Top Israeli government officials told the Post that they were working under the assumption that the U.S. call to halt all settlement growth, including natural growth, did not include Jerusalem.
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It is worthy of note that the US government doesn't even recognize the WESTERN part of Jerusalem as part of the State of Israel even though it is within the Green Line.
Today, US passports are renewed through the postal system. However, until recently, a US citizen wishing to renew his passport in Israel would have a chance to see that Jerusalem - east or west - is not part of Israel in the eyes of the State Department. The US consulate in Jerusalem would not handle any issues for those coming from outside the city. "You live in Israel, so go to the embassy in Tel-Aviv..." In the end, when you got your new passport, it would say that it was issued in the US embassy in "Tel-Aviv, Israel". But if you were a Jerusalemite, your passport would say that it was issued in the US consulate in "Jerusalem" (no country). Needless to say, the Americans do not recognize West Jerusalem as the capital of Israel. After all, it is not an Israeli town in their eyes.