The policy of establishing and expanding settlements may well be the only constant in Israeli practices on occupied Palestinian territory since 1967. Yet it is possible to discern several distinct phases in this policy depending on the party in power in Israel.

In the early years of the occupation, the settlement policy of Israel in the occupied territories was determined by the Labor Party's vision of future Palestinian-Israeli relations. Labor aimed at a future final settlement based on territorial division, first between Israel and Jordan and later between Israel and the Palestinians. Thus, settlement building was concentrated in the parts of the Palestinian territory the Labor Party wanted to ensure Israel would not give up in any final agreement, such as East Jerusalem, the Jordan Valley and certain areas of the West Bank adjacent to the 1948 borders near Qalqiliya and Tulkarm, as well as areas on top of aquifers.

The rest of the territories, particularly areas with dense Palestinian population concentrations, were left settlement-free on the assumption that some of these would eventually be given up as part of a territorial-based solution.

But with the first Likud-led government in 1977, there was a significant and strategic shift in the settlement policy. Likud's vision of future Palestinian-Israeli relations was based on Israel maintaining a certain level of control over all the occupied territories with a view to any solution being founded on a functional rather than territorial division.

In order to ensure territorial control over all areas, the Likud thus expanded the areas of Jewish settlements into the West Bank's interior, regardless of population density or security considerations. The climax of that approach was during the 1980s when Ariel Sharon was minister of infrastructure, a portfolio that included settlements, and during which Israel's settlement policy became completely arbitrary. Infamously, Sharon called on Israelis to "grab the hilltops".

But this not only adversely affected the lives of Palestinians: it created an unmanageable security burden for Israel and significantly complicated any future political negotiations for a peaceful settlement.

Settlements are not just one of the components of the conflict or one of the different issues for negotiations for final status as determined by the Oslo Declaration of Principles (that also includes Jerusalem, borders, security, refugees and water). Settlements touch on most of the other final status issues. The issue of borders, for example, is from an Israeli perspective largely determined by the location of settlements. Jerusalem has a major settlement component, while the issue of water is also related to settlements, many of which were located exactly to ensure Israeli control over water resources.

In addition, the settlement issue is a complicating factor in any attempt to resolve the security situation. With settlements located willy-nilly across Palestinian territory, including between the different densely populated Palestinian areas, the security situation can only be resolved, from an Israeli perspective, at the expense of Palestinian freedom of movement and territorial contiguity, a clearly unacceptable situation.

What the last 40 years of Israeli settlement policy does teach us is that settlements have been used by Israel as an instrument to secure its occupation of Palestinian territory. Thus it is possible to conclude that since any peace agreement requires an end to this occupation, the settlement issue is the main obstacle to peace.

Maybe the most important attempt to reach peace in recent years that was accepted by Israelis, Palestinians and almost everybody else, the 2003 roadmap, failed to move things forward mainly because of settlements. The first phase of the roadmap states that Israel should "immediately dismantle settlement outposts erected since March 2001 and, consistent with the Mitchell Report, freeze all settlement activity (including natural growth of settlements)".

Since the roadmap was issued and signed, not only has Israel failed to move toward fulfilling its obligations under phase I, but new settlement outposts have been built and existing settlements continue to expand. Yet now, with the most recent American attempt to renew peace efforts at Annapolis, the only thing the parties were able to agree on is the exact thing that they failed to implement in the last four years, i.e., the implementation of the first phase of the roadmap.

One of the best explanations for why, in spite of significant progress, Oslo ultimately failed is that Israel insisted to build and expand settlements. The settlements contradict the very essence of what the peace process is about. If the international community does not do whatever it takes to convince and prevent Israel from continuing its settlement project, the Annapolis process will meet the same fate as Oslo.