Even Mahmoud Abbas would have been hard put to dream up a greater victory for Palestinian diplomacy than the one handed to him Tuesday on a silver platter by the Israeli Interior Ministry. The condemnations have been pouring in since the plan to build 1,600 homes in Jerusalem's Ramat Shlomo neighborhood was announced. Not only from U.S. Vice President Joe Biden, but from the United Nations, the European Union and world leaders, all of them slamming the decision.

While government officials were busy yesterday blaming each other for the bad timing, it seems they were missing the bigger picture: Washington and the international community will no longer accept, even by looking the other way, Israeli construction in East Jerusalem. The capital is now the focus of the cold (but slowly warming) war between Israel and the Palestinians.

The Palestinian Authority is exploiting this with weekly demonstrations, while Israel throws fuel on the fire by taking further unilateral steps. The situation is only likely to escalate this morning with the expected disclosure of full details of the city's building plans.

Senior PA officials barely contained their satisfaction yesterday. While waiting for the start of Biden's press conference in Ramallah, a Palestinian reporter said the Palestinian people "thank Benjamin Netanyahu from the bottom of their hearts for the service he rendered to us." Chief Palestinian negotiator Saeb Erekat said the PA welcomed the harsh international response to the Israeli decision.

With the entire international community behind it, the PA is expected to demand, in preparation for the indirect talks with Israel, the withdrawal of the Ramat Shlomo plans as well as an Israeli promise not to build in East Jerusalem for the duration of the talks.

Biden was confronted yesterday with a rather impressive show of Palestinian strength. In Ramallah and Bethlehem he saw signs of an economy recovering from the decade-long knockout punch dealt by the second intifada. He marveled at the level reached by the PA security forces under the tutelage of U.S. Lt. Gen. Keith Dayton.

Above all, he heard the Palestinian president, Abbas, and Prime Minister Salam Fayyad speaking in a language the Americans love to hear: no to terror, yes to peace. In comparison it appeared that the Israeli government had caught what used to be called the "as if" policy of Yasser Arafat: declaring a freeze on construction with one hand and planning new building projects with the other.

From the Israeli perspective, this embarrassing affair could have much more serious consequences. The main purpose of Biden's visit is to increase Israeli-U.S. coordination in the campaign against Iran's nuclear program. As things stand, the level of trust between Barack Obama and Netanyahu is low. If the prime minister proves once again that he can't be trusted not to embarrass the U.S. president when it comes to construction in Jerusalem and the settlements, how can they trust each other on Iran, where the issue of coordination is more critical?

Three and a half months in, the settlement freeze is turning out to be more of a slowing down. With all the exceptions being made, its effect is limited and it appears to be mainly a demonstration of Israel's willingness to offer concessions to expedite the renewal of negotiations. The total disappearance of the settlers' protests against the freeze, which they originally described as a disaster, testifies to the actual state of things.

Israel Defense Forces Chief of Staff Gabi Ashkenazi heard about the flap with Biden while in the United States to speak at the annual gala dinner of American Friends of the IDF, in New York. He was also there to tighten his already close relations with the U.S. military establishment.

The main threat to world peace, he told his audience in New York, is Iran. In stopping that country's nuclear program, he said that "all options should remain on the table."

It was a success: With Ashkenazi as the drawing card, $20 million was raised in one night - money that will benefit Israeli soldiers. The commander in chief's decision to reprise the feat in Miami shows, one hopes, that the tensions with Hezbollah on Israel's northern border have eased a bit. U.S. officers visiting Israel this week, meanwhile, voiced surprise: With U.S. security aid of $3 billion a year, why does Israel have to send its chief of staff abroad to do fundraising?