Nothing has more potential to undermine the relationship between the United States and Israel than the issue of settlements. Mideast Peace Envoy George Mitchell said in 2003, "Opposition to the government of Israel's policies and practices regarding settlements…has been consistent through the Carter, Reagan, Bush, Clinton and Bush administrations; just as consistent has been the continued settlement activity by the Israeli government." If the Obama team is not able to come to a workable set of understandings with the Government of Israel on this issue, both the peace process and the United States-Israel relationship will suffer. During the George H. W. Bush administration, particularly from 1990-92, tensions over settlements so severely strained ties between Israel and its American ally, that direct communication between the President of the United States and the Prime Minister of Israel ground to a halt. If not managed very carefully by both sides, the settlement issue could again become a point of friction leading to diplomatic paralysis.
It is safe to predict that the Obama administration will call for a settlement "freeze." George Mitchell has been associated with the freeze concept since the Commission he headed in 2001 concluded that "Israel should freeze all settlement activity, including the 'natural growth' of existing settlements." The Bush Administration signed on to the idea in 2003, when it joined with the E.U., Russia, and the Secretary General of the U.N. to promulgate the "Roadmap to a Permanent Two-State Solution to the Israeli-Palestinian Conflict." The Roadmap requires, in Phase I, that, "Consistent with the Mitchell Report, the Government of Israel freezes all settlement activity (including natural growth of settlements)." The Obama Administration's commitment to the Roadmap was reaffirmed by Secretary of State Hillary Clinton in her confirmation hearing, and no doubt she means to include in this the call for a settlement freeze.
The idea of a freeze on settlements, including natural growth, seems eminently sensible to many Americans. A majority in this country think that settlements are an obstacle to peace, and that their continued expansion undermines the confidence of the Palestinians by creating an impression of "creeping annexation" of the West Bank by Israel. If their complete removal must be postponed until there is a final status agreement, a freeze on growth of settlements should be an interim step, a "confidence-building measure" to help negotiations succeed. And the prevailing American view of a settlement freeze is simple: no new settlements, no geographic expansion of existing settlements, and no more construction in settlements. Basically, no anything beyond what already exists.
A majority of the public in Israel, and the leaders of all three of the largest political parties (Kadima, Labor, and Likud), have at times expressed a willingness to agree to a settlement "freeze" as part of a package of confidence building measures undertaken by both sides, depending on what is meant by the term "freeze". All the major parties have indicated that they can accept a freeze on the establishment of new settlements, on further expropriation of land for existing settlements, and on the appropriation of government funds for expansion of settlements beyond agreed limits.
But, with regard to a freeze on natural growth in the settlement communities that already exist, Israeli governments insist on three limiting principles which are regarded as fundamental. These principles have had various degrees of acceptance by different figures in the United States government, but they are seldom discussed in the public debate. The real heart of the Obama team's policy toward settlements, will be determined by how it responds to these three principles that Israelis consider essential.
First, Jewish communities in Jerusalem cannot be put in the same basket as settlements in the West Bank. No major party in Israel, and no significant part of the public, is willing to count as "settlements" to be "frozen," the Jewish neighborhoods that fall within the juridical boundaries of Jerusalem that were recorded in the "Basic Law--Jerusalem" in 1980, regardless of whether they are on land that was under Jordanian rule before 1967 or not. To Israelis, Jewish neighborhoods in the nation's capital are not "settlements" subject to negotiation and possible compromise. They are an integral part of the sovereign state of Israel. Even among those who might be willing to relinquish Arab neighborhoods of Jerusalem to achieve a comprehensive peace agreement (perhaps half the Israeli public), there is no support at all for sacrificing or impeding the Jewish communities inside the city limits.
Outside Israel, the "Basic Law—Jerusalem" has no standing. In fact, the Israeli statute was repudiated by the U.N. Security Council in Resolution 478 (1980) which described it as "Null and void…a violation of international law." The Arab League, including the Palestinian Authority, and many other countries following their example, consider East Jerusalem to be "occupied territory" and Jewish communities there to be "settlements." The United States does not treat East Jerusalem as occupied territory, but neither has it recognized Israel's sovereignty over the area. As a practical matter, the State Department does not tabulate Israeli communities within Jerusalem as part of its "settlements" statistics. Tacitly the U.S. has given a degree of recognition to the distinction between East Jerusalem and the West Bank. The Obama Administration will have to go one step further by formally excluding East Jerusalem communities from a "settlement freeze," if it hopes to make any progress toward a resolution.
Second, with regard to settlements in the "West Bank," excluding East Jerusalem, the Government of Israel and the Israeli public draw a further distinction. Israel puts in a special category what became known in the Oslo talks as the "settlement blocs." These are mostly bedroom suburbs of Tel Aviv and Jerusalem that were given a unique status in the Oslo negotiations, separate from the "outlying" settlements deeper in the interior of the West Bank. At the Camp David peace talks in July 2000, President Clinton proposed, and Yasser Arafat accepted, that these "settlement blocs," comprising only 5% of the land of the West Bank but including about 80% of the settlers, would come under Israeli sovereignty, provided also that there would be a "swap" of land given by Israel from its own pre-1967 territory to compensate for the perceived Palestinian sacrifice. Settlements outside the blocs would be relinquished by Israel, but those inside the blocs would remain Israeli.
While the understandings reached at Camp David had no legal standing after the negotiations collapsed in 2001, the concept of agreed settlement blocs has become one of the basic assumptions in subsequent Israeli thinking about a two-state solution. Israel sought some recognition from the Bush Administration that it too would recognize such distinctions, and Israeli officials believe they got that recognition in 2004. In an exchange of letters on April 14, 2004, Prime Minister Ariel Sharon acknowledged "responsibilities facing the State of Israel" under the Roadmap, including "limitations on the growth of settlements." President George W. Bush acknowledged in response that, "As part of a final peace settlement, Israel must have secure and recognized borders… In light of new realities on the ground, including already existing major Israeli populations centers, it is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949…It is realistic to expect that any final status agreement will only be achieved on the basis of mutually agreed changes that reflect these realities."
Israel understands this to mean that, since this Executive Agreement, settlements in the blocs that would remain part of sovereign Israel in a future negotiation, will be treated differently by the United States than settlements outside the blocs agreed at Camp David, even before a future agreement is reached. The Government of Israel believes it has a commitment from the United States to accept that a "freeze on natural growth" need not apply to settlements inside these blocs, provided that the construction remains within the territorial limits understood at Camp David. Sharon's successor, Ehud Olmert, said in April 2008. "It was clear from day one to Abbas, Rice and Bush that construction would continue in population concentrations -- the areas mentioned in Bush's 2004 letter. I say this again today: Beitar Illit will be built, Gush Etzion will be built; there will be construction in Pisgat Ze'ev and in the Jewish neighborhoods in Jerusalem. It's clear that these areas will remain under Israeli control in any future settlement."
The Obama Administration has decided that it will accept the Bush commitment of April 14, 2004, but not yet whether it will accept these implications of the agreement. If it does not, it will be at odds not only with the Likud, but also with Kadima and Labor. It is difficult to imagine any Government of Israel agreeing, for example, to freeze all construction and natural growth inside a community like Ma'ale Adumim, a huge bedroom suburb of Jerusalem ten minutes away, with a population of 33,000, established by a Labor government more than thirty years ago.
The third distinction that Israelis make about a settlement freeze, on which the Obama team will need to decide its position, is about the kind of "freeze on natural gowth" that is to be imposed on the settlements that are outside the blocs and outside East Jerusalem. The Sharon and Olmert governments were willing to ban outward geographic expansion of these established settlements, but they reserved the right to continue what Shimon Peres dubbed "vertical growth," meaning upward or infill expansion inside the existing "construction line" of established houses. If outward horizontal expansion affects the Palestinians and gives the impression of "creeping annexation", vertical growth has much less impact. As a condition for an agreement to curtail "natural growth," Israel wants to retain the freedom to permit communities to add a room or build between existing houses, as long as there is no outward expansion of the settlement.
Israel believes it received a commitment from the Bush Administration to accept such "vertical" growth inside the construction line of each settlement. In a letter from Sharon's top aide, Dov Weissglas, to National Security Adviser Condoleeza Rice in June 2003, Weissglas stated that there were "understandings reached between Israel and the U.S. regarding the Jewish settlements in Judea, Samaria and Gaza: ... No new towns will be built, and construction will be frozen in the existing towns, except for building within the existing building lines, as opposed to the municipal border." Prime Minister Ariel Sharon implied such agreement publicly in his speech at the Herzliya Conference on December 18, 2003: "Israel will meet all its obligations with regard to construction in the settlements. There will be no construction beyond the existing construction line, no expropriation of land for construction, no special economic incentives and no construction of new settlements."
A few months later, on April 18, 2004, Sharon's aide Dov Weissglas asserted, in another letter to Rice, "the following understanding, which had been reached between us: 1. Restrictions on settlement growth: within the agreed principles of settlement activities, an effort will be made in the next few days to have a better definition of the construction line of settlements in Judea & Samaria. An Israeli team, in conjunction with Ambassador Kurtzer, will review aerial photos of settlements and will jointly define the construction
line of each of the settlements."
The Government of Israel quickly acted to enforce the distinction. On August 5, 2004, a settler newspaper reported that, "The Defense Ministry has completed a large-scale project to mark the existing built-up borders of all the Jewish communities and towns in Judea and Samaria - and no further construction will be allowed beyond them. Yediot Aharonot reports today that aerial photos will be sent to the United States, which will monitor every building aberration. Though the towns will be allowed to appeal the decision, every building beyond the marked borders could be subject to immediate demolition. The above program is in accordance with the commitment Prime Minister Sharon gave U.S. President George Bush three months ago."
The Bush Administration was reluctant to acknowledge publicly that it had arrived at such an understanding with the Government of Israel, but there were several public indications that it had. The New York Times' Steve Weisman reported on August 21, 2004, "The Bush administration…has modified its policy and signaled approval of growth in at least some Israeli settlements in the occupied West Bank, American and Israeli officials say…The administration now supports construction of new apartments in areas already built up in some settlements, as long as the expansion does not extend outward…according to the officials." The Washington Post's Glenn Kessler reported on October 30, 2004 that, "during an interview with Egyptian television [in September 2004], Deputy Secretary of State Richard L. Armitage mused openly about a definition of natural growth. ‘If you have settlements that already exist and you put more people into them but don't expand the physical, sort of, the area -- that might be one thing,' he said. ‘But if the physical area expands and encroaches, and it takes more of Palestinian land, well, this is another.'" The Post added that "a senior administration official told reporters at a briefing that the purpose of a settlement freeze is to make sure additional settlers would not impede Palestinian life or prevent the formation of a viable Palestinian state. It makes no difference, he said, if the Israelis add another house within a block of existing homes." And the Post added that Secretary of State Colin L. Powell said the administration was negotiating with Israel over whether its settlements in the West Bank can grow within existing settlement boundaries.
While the Administration's background statements and the absence of denials implied that the Israeli assertions that there was an agreement were accurate, the Administration never quite said so in a clear way. But no denial was issued after August 21, 2004, when a front page story in the New York Times story appeared under the headline "U.S. Now Said to Support Growth for Some West Bank Settlements", claiming loudly that such an agreement existed. Nor was there any correction after the Guardian published an article headlined, "Secret US Deal Wrecks Road Map for Peace" on August 27, 2004, reporting that "The United States was accused this week by Palestinian leaders of …giving its covert support to Israel's expansion of controversial settlements in the West Bank. American officials are privately admitting they have…given Jerusalem tacit permission to build thousands of new homes on the disputed land…A European diplomat said this week, ‘The US has tacitly agreed that [Israel's] position has validity and has shown that limited building is permissible.'"
There were some carefully parsed partial denials nearly four years later, when Glenn Kessler of the Washington Post revisited the issue on April 24, 2008. But Kessler also reported an on-the-record confirmation from Daniel Kurtzer, then the U.S. Ambassador to Israel, who said he had argued at the time against accepting the April 2004 Weissglas letter that asserted there was a U.S.-Israel understanding on the construction line concept. Kurtzer told the Post, "I thought it was a really bad idea. It would legitimize the settlements." Kurtzer said that, in the end, the White House did not send the team to define the construction lines, "when it became clear it would not be easy to do." It appears that, as an alternative, the Israeli Ministry of Defense provided the United States with aerial photographs marking the construction line of each settlement (reported by Yediot Aharonot on August 5, 2004.)
The Obama team may find it difficult to obtain a clear and consistent record of these American-Israeli understandings about the construction line principle, because many of the commitments were expressed orally rather than in writing, in conversations with select White House officials. Apparently these were not reported to other officials of the Bush Administration. Sharon's representative, Dov Weissglas told the Washington Post's Kessler in 2008, that in April 2004 he had negotiated a "verbal understanding" with deputy national security adviser Elliott Abrams, and then Rice and Sharon approved the deal. He told the Post, "I do not recall that we had any kind of written formulation," except his own letters back to Rice stating that the agreements existed.
Those who want to drive a wedge between Barack Obama and the next Prime Minister of Israel know that settlements could become the "third rail" of their relationship. Settlements did not cause the conflict in Gaza, and the removal of settlements there certainly was not a cure. When Ariel Sharon took every last settler out of Gaza four years ago, it did not end the Hamas attacks. The withdrawal of the settlers was instead followed by a sevenfold increase in Kassam rockets fired into Israeli communities. Obama is going to hear a lot of assertions that pulling the Israeli settlements out of the West Bank will bring peace. If nothing is done about the real cause of the violence—the networks of Palestinian extremists supported by Iran—further Israel withdrawal could be followed by a still greater and more dangerous escalation of violence, the opposite of peace. Settlements are not the cause of the violence, and their removal is not the cure.
An interim settlements freeze that meets the essential objectives of the Roadmap can be achieved. A carefully nuanced final resolution of the settlement issue can be achieve in the final status negotiations. To accomplish these objectives, the Obama team will have to understand and respect the fundamental concepts and working arrangements that Israelis consider to be critical to their interests. A simplistic, absolutist mindset about settlements will certainly lead to an impasse.
Steven J. Rosen is director of the Middle East Forum's Obama Mideast Monitor, and former Director of Foreign Policy Issues for the American Israel Public Affairs Committee (AIPAC).
 Quoted in Washington Post, April 24, 2008
 Quoted in Settlement Report, May-June 2004, Foundation for Middle East Peace, and in Arutz Sheva, August 5, 2004
 Arutz Sheva, August 5, 2004