Shoe-horned into the slopes of Sheikh Jarah, an Arab neighborhood in East Jerusalem, is the newer Jewish enclave Shimon Hatzadik, or Simon the Righteous.
The 40 Israeli residents, guarded by a privately hired gunman, may soon have more compatriots just around the bend if the Shepherd's Hotel, a forlorn, century-old building, is demolished and replaced with 90 housing units, as planned.
The reason the newcomers came is the same reason the longtime residents would like to see them leave: The more Jews who settle in East Jerusalem Arab neighborhoods such as these, the less likely it is that Palestinians will be able to build the capital of their hoped-for state here.
The Israelis, aided by ultranationalist groups that buy up Arab properties and by the tacit support of the government, see themselves as pioneers. But Palestinians see them as settlers - and the European Union, soon to release a controversial report attacking "the construction and expansion of illegal settlements, by private entities and the Israeli government, in and around East Jerusalem" - appears to agree.
The report, leaked to the press, sharply criticizes the growth of Israeli enclaves in East Jerusalem neighborhoods that surround the Old City, as well as Israeli plans to build up the "E1" area, a tract of land between Jerusalem and the East Jerusalem settlement of Maale Adumim. Such Israeli expansion, critics argue, will cut off Palestinian areas in the West Bank from each other and from East Jerusalem, where Palestinians hope to build their capital.
"Several inter-linked Israeli policies are reducing the possibility of reaching a final status agreement on Jerusalem, and demonstrate a clear Israeli intention to turn the annexation of East Jerusalem into a concrete fact," the draft EU report states, citing the ongoing construction of the security barrier, which runs over the Green Line, Israel's pre-1967 boundary, into the West Bank.
In a separate report issued Thursday, the prominent Israeli human rights group Btselem presented what the group said was evidence that the wall's route was making way for settlement expansion in the territories, rather than focusing exclusively on security. That conclusion seemed to be supported by a key member of Ariel Sharon's government, Justice Minister Tzipi Livni, whose spokesman said Thursday that the borders of a future Palestinian state would be similar to the line drawn by the security barrier.
The EU report, scheduled to be released Dec. 12, comes at a complex time, with EU-Israel ties just beginning to improve. While European involvement in recent years was dismissed by Israel as overtly pro-Palestinian, the Israeli government recently acquiesced to putting European monitors at Rafah, the border crossing between Egypt and Gaza.
"There was a perception of governments, both Likud and Labor, that the Europeans automatically come down on the other side," says Israeli Foreign Ministry Spokesman Mark Regev, who notes that Israeli officials have not received any such report from the EU, but have only read about it in the media.
"The Europeans were very involved in the Gaza [border crossings] agreement," Mr. Regev adds, explaining that they've been able to play more of a role because "they've been more balanced."
Israeli government officials are also quick to point out that East Jerusalem, formally annexed by Israel in 1980, is by Israeli law part of the nation's capital. But that annexation was not recognized by most of the international community - the US included. During her trip here last month, US Secretary of State Condoleezza Rice said the Bush administration had "been very clear that there should be no activities that prejudge a final status agreement."
The Israeli Committee Against House Demolitions (ICAHD), a group of peace activists, argues that the current growth in East Jerusalem does just that.
"A viable Palestinian state has to include [East] Jerusalem," says Jeff Halper, an anthropologist and ICAHD's coordinator. "Up to 40 percent of the Palestinian economy is dependent on it. If you cut Jerusalem out - and that's what plans like E1 are doing - you're cutting the economic heart out of any Palestinian state.
"I would read this document as a panic document," he adds. "These [settlements] are ... ending any possibility of a two-state option, and unless we act very quickly, we will beyond the point of changing it."
Some here would argue that the lessons of Israel's disengagement plan - which pulled some 8,000 Jewish settlers out of Gaza after a 38-year Israeli occupation - demonstrated that even "facts on the ground" are not necessarily irreversible. Still, given Jewish religious ties to Jerusalem and broad political support for keeping Jerusalem as Israel's undivided capital, moving Israelis out of East Jerusalem would be a far trickier task than moving them out of Gaza.
In the hilltop compound of Shimon Hatzadik, most people distrust the media. "I'm not interested in being interviewed," says a young mother hurrying past with a child in tow. Just around the corner, the shuttered Shepherd's Hotel is guarded by a few Palestinians who say they work for Irwin Moskowitz, an American businessman who has purchased several properties in East Jerusalem so that Jews could move into Arab neighborhoods.
More than a dozen small Jewish enclaves exist, or are under construction, inside or next to Arab neighborhoods in East Jerusalem, according to various left-wing Israeli groups which oppose - and therefore track - all attempts of Jewish groups to move into such neighborhoods.
"What should I do?" says the head guard, who would only give his first name, Youssef. "I didn't have other work and I have to feed my family."