JERUSALEM — (AP) — The small South American nation of Paraguay reopened its embassy in Jerusalem on Thursday, becoming the latest of just a small handful of countries to recognize the bitterly contested city as Israel’s capital.

The move marks a welcome diplomatic victory for Prime Minister Benjamin Netanyahu, who has watched Israel's international isolation deepen as the devastating war in Gaza drags on.

Paraguay first relocated its embassy to Jerusalem in 2018 under the pro-Israel government of then-President Horacio Cartes but reversed its decision months later when a new administration came to power.

The decision of President Santiago Peña, a protégé of Cartes who has followed in his mentor's footsteps, to reopen the Jerusalem embassy makes Paraguay the first country to make the move since Hamas' Oct. 7 attack last year triggered the war.

The fate of Jerusalem is one of the most intractable disputes in the Israeli-Palestinian conflict.

It’s also a controversial move. Israel views the entire city as its unified capital, while the Palestinians want east Jerusalem as the capital of their future state. Israel annexed east Jerusalem, home to the Old City, with holy sites sacred to Jews, Christians and Muslims, in 1967 in a move that was not recognized by the international community. Most countries run their embassies out of Tel Aviv.

Paraguay now joins the United States, Honduras, Guatemala, Kosovo and Papua New Guinea as countries that have stationed their embassy in Jerusalem.

Spirits were high at the ceremony marking the embassy’s inauguration Thursday, with Netanyahu and Israel’s new Foreign Minister, Gideon Saar, lavishing praise on President Peña.

“My good friend Santiago,” said Netanyahu, addressing Peña. “We’re a small nation. You’re a small nation. We suffered horrible things but we overcame the odds of history…we can win and we are winning.”

“Jerusalem is the capital of Israel. It will always be the capital of Israel,” Netanyahu said. “That will never change.”

The ceremony came as the humanitarian crisis in Gaza has brought a wave of condemnation on Israel, undermining its international standing.

The world's top war-crimes court issued arrest warrants last month for Netanyahu and his former defense minister, accusing them of crimes against humanity during the war in Gaza. The Israeli offensive has so far killed over 44,800 Palestinians, more than half of them women and children, according to the Gaza Health Ministry which does not say how many are combatants. The warrants turn Netanyahu and Gallant into internationally wanted suspects, putting them at risk of arrest when they travel abroad.

Nevertheless, Peña invited Netanyahu to visit Paraguay. Netanyahu hung a Jewish mezuzah, a small scroll containing verses from the Torah, on the doorway of the new Paraguayan embassy.

Israel's top diplomat, Saar, said Israel and Paraguay shared a “friendship based not only on interests but also values and principles.” He said he would soon visit Asunción, Paraguay's capital, with a delegation from the Israeli private sector. He and Paraguayan Foreign Minister Rubén Ramírez Lezcano signed a series of bilateral agreements at the ceremony.

Peña thanked Netanyahu and said he looked forward to future collaboration with Israel.

“This is very important for you. We recognize that this is a very strong statement,” Peña said. “Israel is going to win, and the countries (that) are standing next to Israel, we are going to win.”

Despite a tiny Jewish community, far smaller than neighbors Argentina and Brazil, landlocked Paraguay has become one of Israel’s closest allies in Latin America. The other countries in the region to recognize Jerusalem as Israel's capital, Guatemala and Honduras, have similarly strong evangelical churches.

Evangelicals, many of whom see Israel’s existence connected to biblical prophecy, are among the Israeli government's most hawkish supporters. In the U.S., conservative evangelicals have long inspired the Republican Party’s pro-Israel advocacy.

Paraguay's conservative leadership has sought to curry favor with former and future U.S. President Donald Trump by strengthening its alliance with Israel as well as Taiwan — two causes célèbres of Republicans.

Paraguayan Foreign Minister Ramírez Lezcano was among the first foreign dignitaries to meet with Trump following his November election victory.

Earlier this year, Peña hosted Sen. Marco Rubio — Trump's pick to become Secretary of State — in what marked the first visit by a U.S. senator to the landlocked country in four decades.

The ascension of Peña to the presidency in 2023 helped revive Paraguay's strong ties with Israel years after his predecessor, Mario Abdo Benitez, shuttered Paraguay's Jerusalem embassy and prompted Israel to retaliate by temporarily closing its own in Asunción.

Under former President Cartes, a powerful cigarette tycoon sanctioned by the Biden administration for corruption, Paraguay immediately followed Trump's move to relocate the U.S. embassy to Jerusalem and break with decades of policy that the city's status should be decided in peace talks.

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Associated Press writers Isabel DeBre in Buenos Aires, Argentina, and Josh Goodman in Miami contributed to this report.

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