Settler leaders launched a harsh tirade against the Obama administration on Monday following the increased US pressure on Israel over the dismantling of illegal outposts and freezing of construction in the settlements.

"The Americans are employing political terrorism against the State of Israel," Yesha Council Chairman Danny Dayan said. "Not only is the Obama administration renouncing the commitments made by President George W. Bush in April 2004 – it's looking as if they regret President Truman's decision on May 14th 1948 to recognize Israel's independence."

The council's director-general, Pinchas Wallerstein, said that Obama views the Israeli leadership as a banana republic. "He doesn't understand that this is a democracy too," he said.

In an interview with National Public Radio on Monday, Obama vowed to sustain close ties with Israel but said the status quo in the region was "unsustainable," and put the interests of both countries at risk.

"Part of being a good friend is being honest," Obama told the US radio broadcaster, continuing his recent tougher tone toward Israel.

"I think there have been times where we are not as honest as we should be about the fact that the current direction, the current trajectory, in the region is profoundly negative, not only for Israeli interests but also US interests," Obama said.

The Yesha chairman said that the recent rhetoric used by Obama and US Secretary of State Hillary Clinton "implies that the current administration doesn't see Israel as a sovereign nation."

Dayan added that the current period, as Obama and Prime Minister Netanyahu "determine the rules of the game," was critical. Dayan said that Israel must draw the line by refusing to agree to a complete freeze in the settlements.

"If not this will snowball and then we won't be able to stop (Obama) on the division of Jerusalem either," he said. "Those who won't stop the American attempt to dictate Israel's housing policies in Samaria, Judea and Jerusalem, will also see them determine the borders of this country, they will say who will be prime minister, what the coalition will look like, and most importantly what the fate of Jerusalem and the Temple Mount will be."