The UN Security Council on Tuesday rejected a Palestinian resolution calling for Israel to withdraw from Palestinian territories by late 2017.
Even if the draft had received the minimum nine votes in favour, it would have been defeated by Washington's vote against it. The United States is one of the five veto-wielding permanent members.
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There were eight votes in favour, two votes against and five abstentions. Australia joined the United States in voting against the measure.
U.S. Ambassador to the United Nations Samantha Power defended her position against the draft in a speech to the 15-nation council.
"The United States every day searches for new ways to take constructive steps to support the parties in making progress toward achieving a negotiated settlement," she said.
"The Security Council resolution put before us today is not one of those constructive steps," she said, adding that it would undermine efforts to achieve a two-state solution. "This text addresses the concerns of only one side.
Jordanian Ambassador Dina Kawar expressed regret that the resolution was voted down.
"We had hoped that the Security Council will today adopt the draft Arab resolution because the council bears both the legal and moral responsibilities to resolve the Israeli-Palestinian conflict," she said.
The defeat of the resolution was not surprising. Washington, council diplomats said, had made clear it did not want such a resolution put to a vote before Israel's election in March.
But the Palestinians, the diplomats said, insisted on putting the resolution to a vote despite the fact that it was clear beforehand that Washington would not let it pass. Their sudden announcement last weekend that they wanted a vote before the new year surprised Western delegations on the council.
In order to pass, a resolution needs nine votes in favour and no vetoes from the council's five permanent members.
The Palestinian resolution called for negotiations to be based on territorial lines that existed before Israel captured the West Bank, East Jerusalem and the Gaza Strip in the 1967 Middle East war.
It also called for a peace deal within 12 months and ending Israeli occupation by the end of 2017.
An earlier Palestinian draft called for Jerusalem to be the shared capital of Israel and a Palestinian state. The draft that was voted on reverted to a harder line, saying only that East Jerusalem will be Palestine's capital and calling for an end to Israeli settlement building.
The Israeli government had said that a Security Council vote, following the collapse in April of U.S.-brokered talks on Palestinian statehood, would only deepen the conflict.
The Palestinians, frustrated by the lack of progress in peace talks, have sought to internationalize the issue by seeking UN membership and recognition of statehood via membership in international organizations.
Israel, which pulled troops and settlers out of the Gaza Strip in 2005, has said its eastern border would be indefensible if it withdrew completely from the West Bank.