Mark Landler
The New York Times
November 9, 2010 - 1:00am

WASHINGTON — President Obama’s criticism of new Israeli housing plans for East Jerusalem, and Prime Minister Benjamin Netanyahu’s even sharper retort, have thrown the Middle East peace talks into jeopardy, with the dispute over Jewish settlements looming as a seemingly insuperable hurdle.

The Obama administration is struggling to restart direct negotiations between the Israelis and Palestinians, which stalled last month after the expiration of a partial freeze on settlement construction in the West Bank. Secretary of State Hillary Rodham Clinton plans to meet Mr. Netanyahu in New York on Thursday, while Egypt sent two top officials to Washington to discuss ways to salvage the process.

But the brusque exchange between Mr. Obama and Mr. Netanyahu reflected again the gulf between Israel and the United States over settlements — an issue Mr. Obama initially made the centerpiece of his Middle East diplomacy. Palestinian officials said Israel’s latest announcement threatened the talks and could prompt a unilateral declaration of a Palestinian state.

When asked in about Israel’s plans for 1,000 housing units for a contested part of East Jerusalem, Mr. Obama said, “This kind of activity is never helpful when it comes to peace negotiations.”

“I’m concerned that we’re not seeing each side make the extra effort involved to get a breakthrough,” the president added during his visit to Indonesia. “Each of these incremental steps can end up breaking trust.”

A few hours later, Mr. Netanyahu’s office responded with a statement, saying that “Jerusalem is not a settlement; Jerusalem is the capital of the State of Israel.”

The United States and Israel have well-known differences over Jerusalem, Mr. Netanyahu’s office said in the statement, adding that building plans should have no effect on the peace talks.

Despite their efforts to build mutual trust, Mr. Obama and Mr. Netanyahu seem to keep talking past each other. On Tuesday, they were worlds apart in symbolism as well as substance: the president voiced his criticism of Israel while on a visit to Jakarta, capital of the world’s most populous Muslim country.

Mr. Netanyahu was in New York, meeting business people, midway through a visit to the United States that included a speech to a Jewish group in New Orleans on Monday, in which he called on Washington to be more aggressive in threatening Iran with a military strike if it did not give up its nuclear program.

Analysts said Mr. Netanyahu’s unyielding tone — a palpable contrast to his chagrined reaction after a similar housing dispute during a visit to Israel by Vice President Joseph R. Biden Jr. — testified to the altered political environment in the United States. The stinging Democratic defeat in the midterm elections, the analysts said, had emboldened Mr. Netanyahu to push back harder against the administration.

“He is dealing with a president who is politically weakened,” said Daniel C. Kurtzer, a former American ambassador to Israel. “A lot of his friends in Washington are Republicans. He feels more comfortable with them, so he just feels that he’s got a freer hand here.”

Israel’s ambassador to the United States, Michael B. Oren, rejected that view. “We’re not looking for a confrontation with the Obama administration,” he said.

He said Mr. Netanyahu was eager to discuss with Mrs. Clinton “how we are going to move forward, once we get over this hump.”

But Mr. Oren declined to say whether Mr. Netanyahu would offer new proposals for breaking the impasse. The United States has asked him to extend the settlement freeze for 60 days in return for security incentives.

Israeli officials have said Mr. Netanyahu is hemmed in by his right-wing coalition, which opposes extending the freeze. Some officials said that by taking a hard line on Israel’s right to build in Jerusalem, Mr. Netanyahu might gain the political cover to compromise over the West Bank.

On Wednesday, Mrs. Clinton will meet with Egypt’s foreign minister, Ahmed Aboul Gheit, and its intelligence chief, Omar Suleiman. Egypt is worried by the impasse, and American officials said they expected the Egyptians to advance their own ideas for resuscitating the talks, which could include an Israeli pledge to withdraw troops from parts of the West Bank.

Whether that would be enough to satisfy the Palestinians without an extension of the settlement freeze is not clear. In another gesture to the Palestinians, Mrs. Clinton will announce the United States’ annual financial contribution to the Palestinian Authority on Wednesday, an administration official said.

Mr. Netanyahu has supported Mr. Obama’s mix of engagement and sanctions against Iran. But in his speech to the Jewish Federations of North America in New Orleans, he called for a more aggressive approach.

“If the international community, led by the United States, hopes to stop Iran’s nuclear program without resorting to military action,” he declared, “it will have to convince Iran that it is prepared to take such action.”

Dan Diker, a senior foreign policy analyst at the Jerusalem Center for Public Affairs, said the speech was calculated to “push the military option to the top paragraph of the policy from the third or fourth paragraph.”

But Defense Secretary Robert M. Gates said that the threat of military action was not the best way to deter Tehran. Mr. Gates said the recent United Nations sanctions against the Iranian government were starting to bite.

Israel’s housing announcement came in the form of plans published for public review in local newspapers on Friday, just before Mr. Netanyahu headed to Washington. As with previous announcements, Israeli officials said the timing was determined bureaucratically, not politically.

Still, the timing raised questions about what Mr. Netanyahu knew and when. After Mr. Biden’s visit to Israel was spoiled last March by a similar announcement that Mr. Netanyahu said was a surprise to him, American officials told the Israelis that they wanted no more surprises.

At the time, Mr. Netanyahu’s aides said he sent out letters demanding lists of future settlement plans to avoid surprises while peace talks were under way. It was unclear whether Mr. Netanyahu knew about this one before it was published in newspapers last week. On Tuesday, it also became clear that some 800 units would be built in the West Bank settlement of Ariel.

Saeb Erekat, the chief Palestinian negotiator, said Israel’s action was “a call for immediate international recognition of the Palestinian state.”

The Palestinian leadership has been talking about shifting its focus to getting international recognition of a Palestinian state if settlement building continued and the peace talks remained stalled. The Obama administration and Arab states have urged it not to go that route.


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