According to Israeli media reports, Yoav Galant, Israel’s Housing and Construction Minister, is promoting the construction of a diplomatic compound for foreign embassies in Jerusalem. The compound will be located in the neighborhood of East Talpiot, close to the location of the new U.S. embassy.
The move to establish the compound is clearly mostly for domestic reasons - that is, to demonstrate to the Israeli public and the international community that the world is gradually acquiescing to the Israeli article of faith of “Jerusalem, the eternal, undivided capital of Israel.” The reality is, if course, that as of now Brazil is the only nation known to be officially considering moving its embassy to Jerusalem. None of this even remotely warrants the establishment of a “diplomatic quarter”.
There is little or no prospect of seriously moving towards implementing this scheme at present. Given this fact, the proposed location, to the extent that it has even been determined, is currently of secondary importance. That said, press reports to the effect that it will be close to the site of the new U.S. Embassy suggest that the location chosen site is the special zone that existed from 1949 until 1967, located between Jordanian East Jerusalem and Israeli West Jerusalem. For our analysis of the status of this zone, see here. Given the limited amount of the available land in that special zone, the area designated for embassies would need to expand into what was unequivocally Jordanian East Jerusalem, and on lands Israel expropriated from Palestinians in August 1970.