Israel's Netanyahu hardens settlement demands in peace talks: report JERUSALEM (Reuters) - Israel's prime minister has increased the amount of occupied territory he wants to keep after any peace deal with the Palestinians, Israeli radio reported on Thursday, a move that could complicate U.S.-backed efforts to reach an accord. Benjamin Netanyahu's spokesman declined to comment on the report that he had added a bloc of Israeli-settled land near the Palestinian governmental seat in the occupied West Bank to a list of enclaves Israel intends to retain. That would leave 13 percent of the West Bank in Israeli hands, Israel's Army Radio said, a prospect likely to dismay Palestinians who want the area for a future state. There was no immediate comment from Palestinian President Mahmoud Abbas. But a Palestinian official, who asked not to be identified, rejected the notion of Israel keeping large clusters of settlements. "We are saying that once we agree on the withdrawal to 1967 borders, we can accept minor exchanges of land on a case-by-case basis," the official said, referring to lines - described by Israel as indefensible - predating the war in which it captured the West Bank, East Jerusalem and the Gaza Strip. According to the report, Netanyahu told U.S. Secretary of State John Kerry that Israel intends to hold on to the Beit El settlement enclave in addition to the Etzion, Maale Adumim and Ariel blocs it has long said it would keep. Beit El, north of Jerusalem, is next to the city of Ramallah, where Abbas's Palestinian Authority is headquartered. Army Radio said Netanyahu had also departed from past peace blueprints that had envisaged an equal trade of land inside Israel for any West Bank areas it retained. Instead, the station reported, Netanyahu has offered to buy some of the settlement land from the Palestinians, but that they had rejected such a deal. The radio attributed its information to an anonymous source familiar with the details of five-month-old, U.S.-brokered peace talks between Israel and the Palestinians. Army Radio said Netanyahu spoke to Kerry about a biblical connection to Beit El, and its depiction in the Book of Genesis as the place where Jacob dreamt about a ladder to heaven. The future of settlements is a core issue in the decades-old Israeli-Palestinian conflict. Palestinians fear Israeli enclaves will deny them contiguous terrain they see as crucial to a viable country. Israel, along with the release of dozens of Palestinian prisoners as part of the talks, has stoked Palestinian anger by announcing settlement housing in areas it hopes to retain. Netanyahu's demands for an Israeli troop presence in the West Bank's Jordan Valley, the likely eastern border of a future Palestinian state, have also rankled the Palestinians. Strategic Affairs Minister Yuval Steinitz said on Israel Radio on Thursday that keeping settlers in the valley was also vital to Israel's security interests. Palestinians seek a state in the West Bank and Gaza Strip with East Jerusalem as its capital. In 2005, Israel pulled its troops and settlers out of the Gaza Strip, now run by Hamas Islamists whom are opposed to the peace talks. More than 500,000 Israeli settlers live among 2.4 million Palestinians in the West Bank and East Jerusalem. Most countries consider the settlements illegal. Netanyahu visited Amman on Thursday to discuss the peace process with Jordan's King Abdullah. An Israeli statement said Netanyahu "emphasized that Israel places a premium on security arrangements, including Jordan's interest in any future agreement" with the Palestinians. Jordan signed a peace treaty with Israel in 1994. Writing by Jeffrey Heller, Additional reporting by Crispian Balmer and Ali Sawafta