* Funding ban angers Israel's government
* EU to send team to Israel to discuss implementation
* EU will not renegotiate guidelines - source (Adds EU and U.S. comments)
By Arshad Mohammed
VILNIUS, Sept 7 (Reuters) - U.S. Secretary of State John Kerry urged the European Union on Saturday to postpone a planned ban on EU financial assistance to Israeli organisations in the occupied Palestinian territories, a U.S. official said.
Kerry made the request at a meeting with EU foreign ministers at which he also called on them to support Israeli-Palestinian peace negotiations, which resumed on July 29 after a nearly three-year hiatus.
The EU imposed restrictions in July, citing its frustration over the continued expansion of Jewish settlements in territory captured by Israeli forces in the 1967 Middle East War.
A senior U.S. State Department official told reporters in the Lithuanian capital Vilnius that Kerry called on the Europeans to consider postponing the implementation of EU guidelines on aid.
"There was strong support for his efforts and an openness to considering his requests," he said.
The guidelines render Israeli entities operating in the occupied territories ineligible for EU grants, prizes or loans, beginning next year.
They angered Israel's rightist government, which accused the Europeans of harming Israeli-Palestinian peace efforts and responded by announcing curbs on EU aid projects for thousands of West Bank Palestinians.
Palestinians praised the guidelines as a concrete step against settlement construction, which they fear will deny them a viable state.
Asked her response to Kerry, EU foreign policy chief Catherine Ashton told reporters the guidelines were simply "putting down on paper what is currently the EU position".
Ashton announced, however, that the EU would send a team, headed by a senior EU diplomat, to Israel on Monday to make sure the implementation of the new guidelines was done sensitively.
"We of course want to continue having a strong relationship with Israel," she said.
The EU team would talk to the Israelis about implementation of the new guidelines but not about renegotiating them, an EU source said.
A senior U.S. State Department official, briefing reporters before the Vilnius talks, said Kerry would give a clear message to EU ministers on the funding issue.
He would tell them that "it's important for those parties who have an interest in a successful outcome (to Israeli-Palestinian negotiations) that they be supportive of this effort and that they find a way to embrace the negotiators and encourage them to move forward, rather than, as it were metaphorically, bang them over the head," the official said.
Jewish settler leaders say the aid they receive from Europe is minimal. But many in Israel worry about possible knock-on effects the EU steps may have on individuals or companies based in Israel that might be involved in business in the settlements, deemed illegal by the international community.
The EU and Israel began talks last month on Horizon 2020, a prestigious 80-billion-euro ($107-billion) European research funding programme. The dispute over the guidelines could jeopardise an agreement on Israel's participation in it.
Israeli-Palestinian peace has been Kerry's main foreign policy initiative since becoming secretary of state on Feb. 1.
He is scheduled to brief some Arab League ministers on his peace efforts in Paris on Sunday and then to meet Palestinian President Mahmoud Abbas the same day in London.
He is also expected to see Israeli Prime Minister Benjamin Netanyahu soon.
The core issues that need to be settled in the more than six-decade-old Israeli-Palestinian dispute include borders, the fate of Palestinian refugees, the future of Jewish settlements in the West Bank and the status of Jerusalem. (Additional reporting by Adrian Croft and Justyna Pawlak; Editing by Andrew Roche)
Our Standards: The Thomson Reuters Trust Principles.