Israel's prime minister, Binyamin Netanyahu, has a bad habit: when things appear to be moving in the right direction for him, he stumbles upon some stupid political landmine, raising doubts about his leadership and credibility.A series of blunders had ruined his first term in the 1990s, and on his way back to power Netanyahu promised that he had changed. For a year, he stayed away from trouble, avoiding unscripted public remarks, giving no interviews, and being attentive to other politicians' needs and interests. But this week, he did it again, ruining the visit of American vice president Joe Biden with an official announcement of a plan to build 1,600 new housing units in Ramat Shlomo, a Jewish neighbourhood of East Jerusalem – despite a well-known American opposition to Israeli settlement expansion. Netanyahu apparently didn't know in advance about the interior ministry's decision, taken by mid-level planning and zoning bureaucrats. But it was according to his government's policy, and he should have and could have taken steps to avoid such unpleasant surprises. His failure to do so portrays him as a hopeless schlemiel, just like "old Bibi" from the previous term.

Biden's trip was meant to mark a new chapter in the cool relationship between the Obama administration and Israel. Mindful of its political trouble at home in view of the midterm elections, and worried about an Israeli attack on Iran's nuclear facilities, the White House dispatched the veep – known to be Netanyahu's best friend in Washington – to plead Barack Obama's case to the Israeli leadership and public. Biden's trip coincided with the announcement of indirect Israeli-Palestinian peace negotiations, to give the battered administration a diplomatic success.

The Israeli interior ministry announcement, on Tuesday afternoon, put Biden in the worst possible position: rather than visit the Middle East as an honest peacebroker, he appeared as Israel's patsy. And not only Biden: Mahmoud Abbas, the Palestinian leader, agreed to resume talks with Netanyahu despite Israel's refusal to hold off construction in East Jerusalem. The new project threatened to show Abbas as Israel's collaborator.

Previous prime ministers built more than Netanyahu in East Jerusalem, but they were careful to tie it in with positive developments in the peace process to avoid American anger. Lacking peace negotiations, Netanyahu's rightwing coalition could not enjoy the American blind eye like its predecessors. Time and again in the past year there were diplomatic clashes over Israeli plans to settle Jews in Arab neighbourhoods, to build new homes for Jews, or to demolish Palestinian homes in East Jerusalem. Each time Netanyahu argued that he was not in the loop, but backed the decisions. His coalition partner Eli Yishai, the interior minister and leader of the rightwing Shas party, has made the settling of more Jews in East Jerusalem his cause celebre – to prevent a future partition of the city, and to deliver cheap housing to his ultra-Orthodox constituents.

In November the Americans tacitly agreed to the exemption of East Jerusalem – the most contested spot in the Holy Land conflict – from the settlement freeze announced by Netanyahu. But they expected not to be publicly embarrassed. When Israel couldn't keep the deal, snubbing its senior American guest, the administration exploded. Biden called Obama, who told him to condemn the Israeli decision in the strongest terms – an unprecedented step in a high-level visit. Netanyahu apologised for the timing, and told Biden that the project in question will be built only "within several years". The vice president accepted the apology, and delivered a staunchly pro-Israel speech at Tel Aviv University, praising "my close personal friend" Netanyahu. The Palestinians were less satisfied, withdrawing their agreement to renew talks.

Netanyahu's constant zigzagging between his rightwing ideology and political partners and his craving for American support has turned the vice president's visit into a diplomatic fiasco. Ultimately Netanyahu could not please both sides without paying a price. Biden's face-saving remarks aside, "Bibi" is left with no friends in America's highest echelons – when he needs all the support he can get vis a vis Iran's threats and the Palestinians' quest for independence. America will not abandon Israel, but its patience for its leader is running out.