The U.S. administration has not been successful in securing commitments from Arab countries to take steps toward normalizing relations with Israel, a senior source in Jerusalem said Wednesday.

The source said U.S. President Barack Obama's recent meeting with King Abdullah of Saudi Arabia did not produce a commitment to encourage the other Arab states to begin normalization.

"In such a situation, the Americans can't continue demanding gestures only from Israel, such as the demand that Israel freeze settlement construction," the source said.

In response, a senior White House source said talks with the Arab states are continuing with the aim of obtaining a commitment to make gestures toward Israel, and there is still hope for progress.

Defense Minister Ehud Barak returned to Israel on Wednesday from a meeting with U.S. Mideast envoy George Mitchell. A senior White House official confirmed reports that progress was made on the issue of settlements, though no agreement had been reached. He added that similar progress had been made in contacts with Arab countries.

Haaretz has learned that the talks with Mitchell included discussions of a package deal to include a curb on settlement construction. Barak reportedly argued that any steps taken by Israel would have to be accompanied by assurances that the Arab states would also move forward. This would lay the groundwork for resumed talks on a final regional peace agreement.

Within the next two weeks or so, Mitchell is expected to visit Israel to continue talks.

A senior diplomatic source said that even if a meeting between Mitchell and the prime minister doesn't resolve the settlement issue, it will narrow the gap, and the prime minister may request a meeting with Obama in Washington in the coming months to seal an agreement.

Barak noted that if a package deal is reached, Israel might agree to a temporary construction freeze in the settlements, but this would not apply to more than 2,000 housing units already being built.

Also yesterday, Prime Minister Benjamin Netanyahu spoke at the traditional Independence Day reception at the residence of the American ambassador, James Cunningham. Netanyahu spoke of shared values with the United States but did not address the settlement issue. Although many senior Israeli politicians attended the event, turnout was lighter than usual.

By attending, Knesset members ignored the call by Likud MK Danny Danon, who wrote a letter to his parliamentary colleagues this week urging them to boycott the event. He said America "was trying to call into question the State of Israel's independence" by pressuring it to halt construction in the West Bank and agree to territorial concessions to the Palestinians.

A senior diplomat said he was puzzled by the logic behind Danon's proposal. He said that despite any disagreements, the event was meant to honor the American people, not any administration.

In his address, Netanyahu highlighted the democratic traditions of Israel and the United States, which he said united them in the face of tyranny. Referring to Obama's recent speech in Cairo, he noted the president's reference to the unbreakable bond between Israel and the United States.