Israeli-Palestinian diplomacy brokered by the United States is rapidly heading toward a September crisis. President Obama and Prime Minister Benjamin Netanyahu need to establish a new understanding quickly when they meet Tuesday at the White House or relations between the two governments will remain stormy and efforts to launch direct negotiations will fail.

The Arab League has given Palestinian Authority President Mahmoud Abbas until mid-September to negotiate in "proximity talks," in which the United States acts as a go-between. Arab League Chairman Amr Moussa has declared that he will take the Israeli-Palestinian issue to the U.N. Security Council if there is no progress by that deadline. So far, both the Israelis and Palestinians are taking an approach that puts the onus on the other. Israel will not engage in the most critical issues via indirect talks, which it sees as a major step back from nearly 20 years of face-to-face negotiations with the Palestinians. Instead, Israel awaits direct negotiations before revealing any substantive positions. The Palestinians, in turn, want to negotiate by proxy, since they say that if they enter direct talks, the Israeli leader would just play for time.

Meanwhile, the clock is ticking on the settlement moratorium announced by Israel last year. The Likud Party's Central Committee late last month voted to not renew the moratorium and to commence settlement building once it expires Sept. 26. Unless direct talks are resumed or the U.S. decides to go through another protracted and ultimately counterproductive confrontation, Israel is likely to resume settlement activity, inviting the attendant international opprobrium.

Some Palestinian leaders might welcome this scenario, given their lack of faith in Netanyahu to negotiate seriously and their hope that resumed settlement activity would precipitate a new U.S.-Israel clash.

All this will come to a head precisely when President Obama is slated to attend the U.N. General Assembly in September. All eyes will then focus on him to see how he rescues the Israeli-Palestinian diplomatic crisis and averts a situation in which the Arab League moves the action to the Security Council to blame Israel for the lack of progress in the proximity talks.

President Obama's best option is to prevent this crisis from escalating. He should call on Israel and the Palestinian Authority to enter direct negotiations immediately. To persuade the Palestinians and the Arab world to do so will require vigorous U.S. diplomacy and Washington's assurance that Netanyahu is serious and well intentioned. Such faith in Netanyahu is currently lacking in the White House.

To overcome this, the Israeli prime minister must not come to Washington empty-handed. He needs to convince the president that Israel shares America's sense of the importance and urgency of reaching an accommodation with the Palestinians.

Netanyahu must tell the president, at least privately, that he is willing to renew the settlement moratorium if face-to-face talks with the Palestinians resume. Otherwise, the talks will explode should settlement activity resume. To demonstrate that he will deliver on his promises, the prime minister should also start implementing the new Gaza policy he pledged last month to the U.S. and Tony Blair, the special envoy for the "quartet" — the U.S., Russia, the U.N. and the European Union — working on Israeli-Palestinian peace. That new policy entails allowing everything but weapons and dual-use items into Gaza, rather than limiting imports to an Israeli-imposed list. It should be adopted before the two leaders meet.

Forming a new U.S.-Israeli partnership does not mean that the two nations will agree on every step in the challenges confronting them. But it would help restore the basic trust required for the two allies to work together and for Israel to take steps for peace, knowing the U.S. will take Israel's security interests to heart. Only with a more open, trusting and effective dialogue, which has been missing since Netanyahu and Obama took power, can a September diplomatic meltdown be avoided.