The most interesting thing about Monday’s allegedly momentous meeting between US President Barack Obama and Israeli Premier Benjamin Netanyahu is that the two men agreed on nothing.

Obama gave precedence to fruitful negotiations for a Palestinian-Israeli deal while Netanyahu continued to insist that the threat posed by Iran’s non-existent nuclear weapons should be given priority.

Obama insisted on early Palestinian-Israeli negotiations without conditions, Netanyahu reiterated his demand for recognition of Israel as a Jewish state before talks could resume.

Obama said the Palestinian-Israeli conflict should be resolved through the creation of a Palestinian state, while Netanyahu argued that the Palestinians should govern themselves, but be denied their right to raise an army and control their airspace and borders, key elements in sovereignty.

Obama called for a halt to Israel’s West Bank settlement drive and improvements in the humanitarian situation in Gaza. Netanyahu said nothing publicly on these issues. Instead, the Israeli prime minister acted: Monday morning, Israel began construction on a new settlement in the northern West Bank, the first completely new colony in 26 years. All other settlement construction and expansion during this period took place in and around existing settlements. We have yet to see how Netanyahu responds on the Gaza issue.

Obama wants Netanyahu to hold serious negotiations with Damascus, but Netanyahu said he would “never” return the occupied Golan Heights to Syria, its price for peace with Israel.

The New York Times quoted Aaron David Miller, a former Clinton adviser on the region, as characterising the meeting as “President ‘Yes We Can’ sitting down with Prime Minister ‘No You Won’t’.”

During four hours of discussion, neither budged on stands adopted before the meeting. This is a bad augury for peace making in this region.

Netanyahu feels he does not need to soften his hard line because he clearly believes that time is on Israel’s side - as it always has been when dealing with US and other Western politicians. Greater Israel, consisting of the whole of geographic Palestine, is the 129-year Zionist project which Netanyahu will not abandon or adjust for a US president in office for four or, at most, eight years.

Netanyahu, a canny operator, is well aware that Obama’s popularity will fade fast in the US once his domestic initiatives fail to deliver economic revival, healthcare, and clean air and water. As soon as this happens, Netanyahu knows that Obama is likely to forget about pressing Israel to make peace with the Palestinians and the rest of the world. This is what the so-called “peace process” is all about.

Unless Israel hands over the West Bank and East Jerusalem to the Palestinians, so that, along with a free Gaza, they can create their state, Israel will never have real peace. Israel will increasingly be regarded by the global public as an apartheid settler state and colonial enterprise out of line with the 21st century. Worldwide mass protests against Israel’s 2006 war on Lebanon and the 23-day onslaught on Gaza finished off the false notion cultivated by Israel that it is the underdog in a hostile region and, therefore, needs to take extraordinary (and extraordinarily brutal) measures to defend itself.

In exchange for making peace with the Palestinians and the Syrians, Obama is proffering a carrot Netanyahu does not really want. Obama is asking Arab and Muslim states to regularise relations with Israel in exchange for “concessions”, such as halting settlement activity and lifting checkpoints and roadblocks in the West Bank. But, on the one hand, the carrot is not Obama’s to offer. Arab and Muslim states cannot be expected to forge ties with Israel until it is clear that it will honour commitments made in the many accords and agreements reached since Oslo was signed in September 1993, including the Wye River Accords, agreed by Netanyahu, former US president Bill Clinton and Palestinian president Yasser Arafat. In particular, these accords specified the handover of 14 per cent of the West Bank to Palestinian Authority control. Eleven years on, Israel has not yet met this obligation.

On the other hand, Netanyahu is not interested in the carrot of normalisation with the Arab and Muslim worlds because Israel cares only for its relations with the West and seeks closer ties with the European Union and the US.

While some analysts suggest that Obama might try to appeal to the Israeli public over Netanyahu’s head, this is unlikely to work.

Netanyahu is in charge of policy and is ideologically committed to Greater Israel. This means that the only way to secure progress on the Palestinian-Israeli and Syrian-Israeli fronts is to use the stick.

The most effective stick is to cut yearly US financial aid to Israel, now $3 billion, by, say, $1 million for every housing unit Israel builds in the West Bank, East Jerusalem and the Golan. If, for instance, Washington reduced aid for each of the units to be constructed in the new settlement begun ahead of the Obama-Netanyahu encounter, Israel would lose $20 million. Since thousands of such units are either in construction in territory meant to be in the Palestinian state, Israel would lose more than the annual subvention. Whatever runs over this amount could be deducted from the rest of the $30 billion promised by the Bush administration.

A second financial sanction would be to deduct from the 10-year package the total amount Israel spends on subsidising the settlers and providing security for them.

Since most of the money given by the US to Israel is used for the purchase of military hardware, such cuts would reduce Israel’s ability to make war on neighbouring states and carry out brutal campaigns against the Palestinians. This would be a very good thing and reduce Arab and Muslim resentment at the US for providing Israel with arms to defend its occupation of East Jerusalem and the West Bank and maintain its siege of Gaza.

Obama may have steel in his spine, but it remains to be seen whether or not he is prepared to adopt the type of financial stick needed to curb Israel’s voracious appetite for Palestinian land.