
Allegations in Israeli newspapers have enraged Jerusalem's Greek Orthodox community, which is mainly Palestinian.
They believe Israel is aiming to expand illegal Jewish settlements in East Jerusalem to isolate Palestinian areas.
On Thursday Palestinian officials asked the US to block growth of the largest West Bank settlement, Maale Adumim.
Patriarch Irineos I hit back at claims he was complicit in the sale of land in East Jerusalem to Jewish developers overseas, saying: "If I have done this, let them cut off my hands."
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