When Israeli officials this week meet US Middle East envoy George Mitchell, when President Barack Obama unveils his Middle East peace plan at the UN in New York next month, and when Benjamin Netanyahu and Mahmoud Abbas hold a possible first encounter on the sidelines of the General Assembly, the common denominator issue will be Israeli settlement building. The Jewish outposts have for decades been one of the biggest obstacles in the way of a settlement but recently the issue has taken on a new dimension.

Israel and the US have apparently been working on a package deal whereby the former would accept a moratorium on settlement building for a period ranging from six months to two years but would insist on completing thousands of settler units currently being built throughout the occupied Palestinian territories. Israel will also not accept any restrictions on what it does in Jerusalem, part of which is occupied territory.

Israel agreed to freeze settlement activity as part of the 2003 road map peace plan but it looks as if it will not be the comprehensive freeze that the Americans — and Palestinians — wanted. Yet the Israelis are apparently confident that the Americans would persuade the Palestinians to go along with the deal they’re poised to make.

Although the settlements are illegal, Israeli officials are sticking like glue to the unwritten understanding with the administration of US President George W. Bush that allowed limited expansion within existing settlements to continue to allow for the “natural growth” of the communities living there. Armed with such US protection, Netanyahu’s government has been building settlements here, there and everywhere. It claims it has not published tenders for new housing units in settlements since it came to power in April. But the Israeli group Peace Now, which monitors building in settlements, says government-backed projects make up only 40 percent of construction and that building has been continuing on the ground in many places. Peace Now underscored the mendacity of Israeli claims that settlement construction was being frozen, saying that in the first half of 2009 Israel constructed 600 new buildings in West Bank settlements. The construction of permanent homes has risen by eight percent since last year.

Peace Now also said there were currently 40,000 new buildings authorized for construction. Construction was also under way in 10 out of 23 outposts that Defense Minister Ehud Barak committed to ending,

Abbas will supposedly not reopen negotiations until Israel halts its settlement activities, however, the Obama administration seems to have lost the showdown with the Netanyahu government over the settlement issue and is now hoping that settlements can be treated more satisfactorily in bilateral talks between the two sides. This assumption is a definitive retreat from the original US position that Israel must first freeze settlement construction as part of its obligations under the road map.

Even though the Palestine Authority is committed not to re-engage in talks without a settlement freeze, there are signs it is retreating from this position, if only to demonstrate to the Americans, for the umpteenth time, Palestinian willingness to engage in talks in the face of complete Israel intransigence. This risks losing for the PA its recently enhanced popularity if another exhausting round of peace talks with Israel proves fruitless, as most Palestinians believe it will be, barring decisive US intervention. However, such intercession looks very unlikely.