WASHINGTON  - The US State Department, reacting to angry Israeli protests, has clarified a warning by Secretary of State John Kerry that Israel could face growing international economic boycotts if the peace talks with the Palestinians failed, saying his remarks were taken out of context.

Kerry’s remarks, which were made on Saturday against a backdrop of new European Union regulations barring deals with Israeli businesses based in occupied West Bank settlements, provoked accusations that he was threatening Israel in on-going peace talks with the Palestinians.

“His only reference to a boycott was a description of actions undertaken by others that he has always opposed,” Jen Psaki, a state department spokeswoman, said on Sunday. “[Mr Kerry] expected opposition and difficult moments in the process, but he also expects all parties to accurately portray his record and statements.”

Kerry, who was speaking at a security conference in Munich on Saturday, said, “You see for Israel there is an increasing delegitimisation campaign that has been building up.  People are very sensitive to it. “There are talk of boycotts and other kinds of things.  Are we all going to better with all of that?”

At the weekly Cabinet meeting in Jerusalem on Sunday, Israeli ministers took these remarks as a direct threat: Make concessions to the Palestinians, or pay a heavy price.

The uproar came as Kerry held cordial talks with his Iranian counterpart, Mohammad Javad Zarif in Munich at which the two officials vowed to intensify nuclear diplomacy, according to news dispatches.

The Israeli ministers accused Kerry of effectively   endorsing “anti-Semitic” efforts to impose sanctions on Israel by   issuing the warning.

Strategic Affairs Minister Yuval Steinitz was quoted as saying Israel would not negotiate with “a gun pointed at its head,” especially when its vital national interests are at stake.  

He described Kerry’s remarks “as damaging, unfair and intolerable.”

Prime Minister Benjamin Netanyahu was quoted as saying in news reports that international pressure on Israel harms peace efforts because it causes the Palestinians to harden their positions.

“Attempts to impose a boycott on the State of Israel are immoral and

unjust,” Netanyahu said, and he said “they will not achieve their goal.”

The latest dispute points to growing suspicion in the Israeli government over Kerry’s push for the creation of a Palestinian state.