If there is any truth in the reports that came out of Prime Minister Benjamin Netanyahu's trip to Europe - that the United States agreed Israel can go on building in East Jerusalem - the headlines should have read "Obama has pulled out of the Middle East peace process."

Paraphrasing the famous statement by Moshe Dayan, that it is best to have Sharm el-Sheikh without peace than peace without Sharm el-Sheikh, it would be best for Obama to freeze the peace process and not thaw settlement building in East Jerusalem, than to thaw the process and leave Jerusalem out of the demand for a freeze on construction, except in Jewish neighborhoods.

From the point of view of the Arabs, and not only the Palestinians, it would be better for the United States to allow Israel to complete the construction of some homes in the settlement of Modi'in Ilit, which is on the border of the West Bank, than to give in to the flow of extreme right wingers into the East Jerusalem neighborhood of Sheikh Jarrah, or Silwan (the City of David).

During the negotiations with Ehud Barak and Ehud Olmert, the Palestinians agreed to exchange the territory of the settlements that are adjacent to the eastern side of the Green Line with territory on the western side of the line. On the other hand, the sensitive issue of sovereignty over the Old City of Jerusalem and the city's holy sites, as well as the fate of a quarter-million Palestinians who were "annexed" unilaterally into the State of Israel (as permanent residents) remains in dispute.

The American position has been and remains that East Jerusalem is occupied territory whose future will be decided in negotiations between the two sides. Like the other countries of the world, and the UN Security Council, the United States has never recognized Israel's decision to annex 64.4 square kilometers of the West Bank and join them to the 6.5 square kilometers that were part of Jerusalem's administrative authority under Jordanian rule.

Israel is the only country in the world that defines as "Jerusalem" the village Walja, which is 9.6 kilometers away from the administrative border of the Jordanian municipality. On the other hand, the village of Abu Dis, which is 1.5 kilometers from that same border, is considered by Israel to be in "Judea and Samaria," or the West Bank.

We think that if we say "united Jerusalem, the capital of Israel" frequently enough, the world will get used to the fact that this territory is ours (the semantics have led to a report on the Voice of Israel on the rise of Israeli exports to "Judea and Samaria").

It has not happened yet, and that is a good thing. Two U.S. presidents, Bill Clinton and George W. Bush, did not approve the resolution passed by Congress in 1995, declaring that "unified Jerusalem" is the capital of Israel.

They stated that moving the U.S. Embassy to Jerusalem will undermine the chances for a permanent resolution to the conflict, and thus harm the national security of the United States.

Unfortunately, both turned a blind eye to construction in the West Bank settlements and the Palestinian neighborhoods that Israel defines as "East Jerusalem."

Twelve years ago Israel had a prime minister who showed that when an American president is determined to freeze Jewish construction in East Jerusalem, even the most right-wing government falls in line.

His name: Benjamin Netanyahu. In July 1997 he decided to stop construction at a Jewish site in the heart of the neighborhood Ras al-Amud, and to evacuate the families who moved in. His justification: "The decision serves the unity of Jerusalem, the unity of the people and the continuation of the peace process."

Then-attorney general Elyakim Rubinstein, who is now a Supreme Court Justice, ruled, "If there is near certainty of violation of public order and endangering public safety, it is possible to block in advance the occupation of the homes, and even to evacuate them."

The head of the Shin Bet security service at the time, Ami Ayalon, warned the prime minister in a report that Jewish construction in the neighborhood would stir riots in the territories.

Since the current Palestinian leadership has renounced violence, it is possible that an American acquiescence to the continued Jewish penetration into Palestinian neighborhoods in East Jerusalem will pass peacefully.

However, a substantive change of such magnitude in the U.S. position regarding a national/religious issue that is so explosive would cause the negotiations between Israel and the Palestinians, among other efforts, to crash and burn.

A precedent of this sort may bury the Arab Peace Initiative and with it normalization of ties with the Muslim world. We must hope that the news that Obama has backtracked on East Jerusalem is merely the wishful thinking of opponents to a compromise that come from the western part of the city.