Prime Minister Benjamin Netanyahu is amenable to an interim agreement in the West Bank that would include the establishment of a Palestinian state within temporary borders.

Netanyahu considers such an interim step a possible way to unfreeze the stalled political process that was created because of the Palestinian leadership's refusal to resume talks on a final settlement. However, the prime minister insists on delaying discussion on the final status of Jerusalem to the end of the process, and refuses to agree to a freeze on Jewish construction in East Jerusalem.

Netanyahu and his aides have held intensive contacts in recent days with representatives of the U.S. administration in an effort to contain the crisis in the relations between the two countries.

The prime minister will meet Friday with U.S. Middle East envoy George Mitchell, who is visiting Jerusalem, and will continue talks that senior Israeli officials held with White House official Dan Shapiro. Mitchell met with Defense Minister Ehud Barak earlier Friday, and was to head to Ramallah later in the day for talks with Palestinian President Mahmoud Abbas.

There have been signals from the White House in recent days of a willingness to see an improvement in relations with Netanyahu. The signals included appeasing messages highlighting U.S. commitment to Israel's security, and peaked with President Barack Obama's Independence Day greeting. Senior aides to the president, including his chief of staff Rahm Emanuel and National Security Adviser, General James Jones, also publicly expressed their support of the strong ties between the two countries.

Both public and private pronouncements of senior figures in the U.S. and Israel suggest that the formula for bringing an end to the crisis comprises a number of elements: advancing an interim stage and a Palestinian state within temporary borders; delaying the discussion on Jerusalem, with an Israeli commitment to avoid provocations; identifying the areas in which Netanyahu and Obama differ, with construction in East Jerusalem topping the list; and a certain American toughening of its attitude toward Iran and Syria.

General Jones said on Wednesday in a speech at the Washington Institute for Near East Policy, a well known pro-Israeli forum, that the differences between Israel and the U.S. will be resolved as allies do. Jones called on both sides, Israel and the Palestinians, to avoid provocations such as Israeli activity in East Jerusalem and Palestinian incitement.

The formula of a Palestinian state within temporary borders was included in the second stage of the road map of 2003, but the Palestinians, and Mahmoud Abbas at their head, opposed it then and oppose it now, considering it a recipe for keeping Israeli occupation of the territories in place.

Three Israeli politicians - Defense Minister Ehud Barak, President Shimon Peres and MK Shaul Mofaz of Kadima - tried to advance the idea of a Palestinian state within temporary borders during the past year, as a reasonable recipe for breaking out of the current political stalemate that was created since elections in Israel. Netanyahu is now leading toward their view, after losing hope of moving toward a permanent settlement with Abbas.

If this initiative progresses, it is expected to result in objections from the parties on the right, who oppose any concession to the Palestinians. Establishing a Palestinian state in the West Bank, or even a partial framework with temporary borders, will require Israel to withdraw from more territory and perhaps even evacuate settlements. But if the Palestinians reject the idea - as is expected - Netanyahu will be able to claim that they are once more missing an opportunity for a settlement by being stubborn and rejectionist.

In an interview to Udi Segal and Yonit Levy on Channel 2 Thursday, Netanyahu said "there will be no freeze in Jerusalem." He said that "the peace process depends on one thing: removing preconditions to negotiations."

Netanyahu warned that if Israel withdraws from Arab neighborhoods in Jerusalem, "Iran will be able to enter there," as it did in Lebanon and the Gaza Strip, "but this will be as part of a final settlement. Meanwhile they tell me that I cannot build and plan on French Hill."

Netanyahu said that in his talks with Obama, "I tell him I can go with you on this - willing and able - but there are things I am not willing and do not do."

He called on the U.S. not to wait for the UN Security Council and impose severe sanctions against Iran on its own. "We prefer that the U.S. lead the confrontation with Iran," Netanyahu said, "but Israel always reserves the right to self-defense."