In what was billed as a major address on recent developments in the Middle East, President Obama today backed pre-1967 borders as the basis for negotiations between Israelis and Palestinians on the contours of an eventual peace deal.

How does this shift U.S. policy?

It’s a subtle, but important change. In calling for borders to be the basis for negotiations the president removed some ambiguity about the U.S. position. Previously, the Obama administration said that the parties would have to debate the Palestinian goal of an independent state along the 1967 lines, prior to the Israeli-Arab war.

“We remain convinced that if they persevere with negotiations, the parties can agree on an outcome that ends the conflict; reconciles the Palestinian goal of an independent and viable state based on the 1967 lines, with agreed swaps,” Secretary of State Hillary Clinton told the American Task Force on Palestine last October.

Now, President Obama has placed the United States closer to the Palestinian camp and endorsed their aspirations of a state along those pre-1967 lines.

“While the core issues of the conflict must be negotiated, the basis of those negotiations is clear: a viable Palestine, and a secure Israel. The United States believes that negotiations should result in two states, with permanent Palestinian borders with Israel, Jordan, and Egypt, and permanent Israeli borders with Palestine. The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps, so that secure and recognized borders are established for both states,” he said today.

The announcement came just a day before President Obama is scheduled to meet with Israeli Prime Minister Benjamin Netanyahu, whose office quickly expressed his displeasure with the change in policy.

“Prime Minister Netanyahu expects to hear a reaffirmation from President Obama of U.S. commitments made to Israel in 2004, which were overwhelmingly supported by both Houses of Congress,” his office said in a series of tweets not long after President Obama spoke, referring to a secret agreement that President Bush made with then-Israeli Prime Minister Ariel Sharon which acknowledged that settlement growth reflected “new realities on the ground.”

“Among other things, those commitments relate to Israel not having to withdraw to the 1967 lines which are both indefensible and which would leave major Israeli population centers in Judea and Samaria beyond those lines,” Netanyahu’s office added.

President Obama will face a domestic test of his new policy when he address AIPAC, the pro-Israel lobby, on Sunday. Netanyahu will likely reiterate his disapproval when he addresses the group on Monday.

Some experts think that President Obama’s comments were carefully calibrated.

“The Obama administration has been encouraging Netanyahu to give them something to work with. Netanyahu gave them nothing. It is clear that one intention of this speech is to attempt to encourage a conversation inside Israel that takes a harder look at some of the choices Israel faces, especially with the more pointed reference to the ‘67 lines,” said Daniel Levy, a former Israeli peace negotiator and now Co-Director of the Middle East Task Force at the New America Foundation.

The debate over the final borders of an eventual Palestinian state goes to the heart of the disagreements between Israelis and Palestinians, touching on Israelis settlements, the right of Palestinians to return to lands inside Israeli territory, and Israel’s security concerns about threats along its borders. U.S. policy on the matter has shifted over the years and over successive presidencies.

After the U.S. government called settlements “illegal” for years, President Reagan said they were “not constructive.” President Clinton changed it again, saying that “natural growth” was acceptable. President George W Bush went further to say that it was “unrealistic” to expect any kind of peace based on old borders.

So in effect, President Obama’s endorsement of the 1967 lines is a return from the shifting positions taken by his predecessors.

Perhaps not surprisingly, some Republicans who hope to challenge President Obama for the presidency next year have criticized the move.

Mitt Romney said the president “has thrown Israel under the bus” and Tim Pawlenty said the move was “a mistaken and very dangerous demand.” Mike Huckabee called it a “grievous mistake.”