Israel signaled that a compromise may be reached in a dispute over settlement construction in the West Bank that threatens to derail U.S.-brokered peace talks with the Palestinians.

Incentives offered by the Obama administration to Israel may allow Prime Minister Benjamin Netanyahu to push through his Cabinet a limited renewal of the 10-month freeze on West Bank settlement construction that expired last month, Israel’s ambassador to the U.S. said.

“The U.S. has come back to Israel with a number of suggestions, incentives if you would, that enable the government to maybe pass a limited extension of two or three months,” Ambassador Michael Oren told the Washington Post.

The Palestinians have threatened to pull out of the peace talks if Israel continues to build in West Bank settlements. Netanyahu said on Oct. 4 that he was in “sensitive diplomatic contacts” with the U.S. administration to find a solution to the crisis that would let the talks continue. Israel’s partial halt of building in settlements expired Sept. 26.

The start of peace talks has seen an increase in violence. Israel said its army today killed two members of Hamas that it suspected of involvement in an attack near a West Bank settlement in August that left four Israelis dead. The military wing of Hamas, the Al-Qassam Brigades, vowed to avenge today’s killings “by all possible means.”

Temporary Extension

Palestinian leaders from President Mahmoud Abbas’s Fatah movement who are conducting the talks with Israel have indicated a willingness to accept a temporary extension of the building moratorium. Arab League chief Amre Moussa said in an interview that Arab foreign ministers will today renew a demand for a construction freeze.

Abbas remains adamant that the talks, which began on Sept. 2, can’t proceed while settlement construction continues, Moussa said. “This is everybody’s position,” he said. “We’re not against negotiations but we’re not just doing it for show.”

Abbas will brief Arab ministers today in the town of Sirte, Libya. The group will include representatives from Qatar, Egypt, Saudi Arabia, Jordan, Syria and Lebanon.

“We want a freeze of all settlement activities and then we can get as quickly as possible to completing the first part of an agreement, on borders and security,” Palestinian negotiator Nabil Shaath said in a phone interview. Once agreement is reached on the borders of a future Palestinian state, it would “end the issue of settlements,” as Israel would then be able to build freely in all areas under its sovereignty, Shaath said.

‘Playing Games’

Shaath said Israel was currently “playing games” and “bargaining for goodies from the Americans.”

Netanyahu will bring a proposal to his Cabinet on Sunday to change the citizenship oath to include swearing allegiance to Israel as a Jewish, democratic state, an Israeli official said Oct. 6. The oath will only apply to non-Jews seeking citizenship.

The loyalty oath is a key demand of Foreign Minister Avigdor Lieberman, who leads Yisrael Beitenu, the second-biggest party in Netanyahu’s coalition, and has threatened to block a renewal of the freeze. Lieberman lives in a West Bank settlement.

The change is aimed at easing Lieberman’s opposition, said Uri Dromi, a government spokesman under the late Prime Minister Yitzhak Rabin.

“It is tactically good for Netanyahu to keep Lieberman in the coalition,” Dromi said. “In a cynical way, this thing, which is a major issue on a constitutional level and should have been discussed in the most serious way, is now rushed to the table to serve a political emergency.”

Lieberman Backing

Lieberman welcomed Netanyahu’s proposal, and said that stressing Israel’s Jewish and democratic nature was essential after incidents such as the participation of an Israeli Arab parliament member in a Gaza Strip-bound aid flotilla in May. The ships attempted to breach an Israeli blockade on the Hamas- controlled territory. Parliament’s House Committee has recommended lifting the lawmaker’s immunity from prosecution.

Eyal Gabbay, director general of Netanyahu’s office, said on Army Radio yesterday that there was “no connection” between the peace talks and the proposed change to the oath.