The Obama administration appears to be turning down the rhetoric in its heated exchange with Israel over last week’s surprise announcement of 1,600 more Jewish housing units in East Jerusalem. It should not, however, relieve pressure on Israel to show that it is ready to compromise in making peace with the Palestinians.

Just days ago, US Secretary of State Hillary Rodham Clinton called the settlements announcement during Vice President Biden’s trip to Israel “insulting”; White House aide David Axelrod characterized it as an “affront.” (Israel captured East Jerusalem in the 1967 war and Israeli housing units there are illegal under international law.)

By Tuesday, Mrs. Clinton was making reassuring comments about the United States and Israel sharing “a close, unshakable bond” and that Washington has an “absolute commitment to Israel’s security.” Of course, that’s true.

But she wisely did not back off her demand for concrete action from Israel as the two sides verge on proximity talks leading up to peace negotiations. The US, she said, is still asking Israel for “the requisite commitment to this process.” Meanwhile, George Mitchell, US facilitator of the talks, delayed his trip to the Mideast this week.

The continued US pressure is necessary. For one thing, the ill-timed announcement about the units made the White House look weak – and that’s not good for the world’s only superpower, whether it’s trying to fight Islamic terrorists or convince China and Russia of the dangers of a nuclear Iran.

The units debacle was the second time President Obama has suffered a very public put-down by Israel. The other was when he swallowed a 10-month moratorium on Israeli settlements, instead of the full stop that he had pushed for in his speech in Cairo last summer. That speech was intended as an outreach to the Muslim world and an attempt to shore up America’s role as an honest broker in the peace process.

More important, though, the pressure is necessary to actually get to peace negotiations and a two-state solution, which Israeli Prime Minister Benjamin Netanyahu says he supports. But does he?

Mr. Netanyahu is sticking to the right to build in East Jerusalem and to the indivisibility of the holy city. The Palestinians consider East Jerusalem their capital, and expect it to officially be so when they have their own state. Other Israeli prime ministers have taken the same stand as Netanyahu, but they have in private been willing to negotiate on the future status of Jerusalem – a negotiation the US supports.

Yet it’s reaching the point where Washington has to question the Israeli government’s intentions, especially after this statement from Netanyahu to his cabinet this week: “It is of utmost importance to understand that the State of Israel and the US have common interests and we [Israel] will act according to the vital interests of the State of Israel.”

The implication of that message is that 1,600 units and East Jerusalem are more “vital” to the Israeli government than is a peace settlement. Netanyahu could be saying this because he’s trying to satisfy a coalition that includes hard-right members; or he could mean it, in which case, what is the point of proximity talks? To buy time and avoid real peace?

The Palestinian leadership in the West Bank is showing some promise with reforms, though negotiating with it still involves only a partial solution. It can only speak for the West Bank, and not Gaza, which is led by the militant Hamas.

Washington must persuade Netanyahu that peace is of vital interest to Israel, not merely a common interest. Taking concrete steps toward settling the Palestinian problem, and then following through – whether in phases or all at once – is the most security-building measure that Israel could take, completely changing the dynamics in the Middle East.

Netanyahu has a choice to make.

He could seriously embrace the peace process, and risk the downfall of his coalition. That might not be so catastrophic. He could then reconfigure his government with the help of more peace-minded partners.

Or, he could continue to play to the hard right while holding the peace process at arm’s length.

Anything the Obama administration can do to help Netanyahu make the first choice would be welcome.