U.S.-Israeli relations are in a crisis over Iran. It has been in the making for quite some time – arguably since the early 1990s – and edging closer to climax by the minute. The personal chemistry between the leaders is abysmal – Barack Obama and Nicolas Sarkozy recently discussed how they can’t stand Benjamin Netanyahu – and disagreements abound on the Arab uprisings, the Israeli-Palestinian conflict and on how to deal with Iran.

Publicly, the two sides claim to share a common objective with Iran, though they may assess risks differently. In reality, the divisions are much deeper. Israel is firmly committed to the zero-enrichment objective espoused by the George W. Bush administration, i.e. that the only acceptable way to prevent Iranian bomb is by preventing it from having nuclear technology, period. “Enrichment in Iran is certainly unacceptable,” Israeli Deputy Foreign Minister Danny Ayalon told me in October 2010.

The Obama administration has left this issue vague, neither rejecting nor accepting this red line. Israel fears that in a final agreement, the Obama White House would accept enrichment in Iran, a fear fueled by the administration’s attempt to exchange Iranian low enriched uranium for fuel pads for a research reactor in Tehran earlier in 2009. Both France and Israel argued that the deal would legitimize Iranian enrichment. In Israel’s view, Obama has made America’s red lines flexible and unreliable.

And between bombing Iran and an Iranian bomb, Israel prefers the former. But it is not confident Obama shares that preference.

When the two states cannot agree on an objective, tensions over tactics and strategies are to be expected. Nowhere has the disagreements been more stark than on the idea of talking to Iran. Obama entered the White House on a promise to pursue diplomacy with Washington’s foes. While this shift away from Bush’s outlook was welcomed in some quarters, it was met with great dismay in Israel – precisely due to the fear that in a negotiation, Washington would betray Israel’s security interests.

“We live in a neighborhood in which sometimes dialogue . . . is liable to be interpreted as weakness,” then-Israeli foreign minister Tzipi Livni said in an interview with Israeli Radio only twenty-four hours after congratulating President-elect Obama on his historic election victory. Asked specifically if she supported discussions between the U.S. and Iran, she left no room for interpretation: “The answer is no,” she declared.

From the very outset, the Netanyahu government sought to steer Washington’s policy away from diplomacy.

On May 18, 2009, Netanyahu came to Washington for a visit that both sides hoped would dispel fears of a crisis, but neither side was in a compromising mood. Netanyahu did not have the appetite for either American diplomacy with Iran or American pressure against Israeli settlements. Going up against the American president, however, would be a dangerous gambit. Obama was immensely popular at the time and enjoyed the political latitude American presidents usually experience only during their first year in office. Clashing with Obama under these circumstances could be very damaging. Still, that was the path Netanyahu chose.

In the weeks prior to his visit to Washington, he intensified the Israeli campaign to weaken Obama’s ability to move forward with diplomacy. The strategy centered on four key areas: securing a tight deadline for diplomacy; tightening sanctions before any diplomacy began; securing American commitment to zero-enrichment; and keeping the military option on the table.

The Israelis argued that diplomacy should not be given more than twelve weeks, otherwise the Iranians could play for time and use the talks to expand their program. Moreover, the only acceptable outcome of talks would be for Iran to completely capitulate and give up its enrichment program. Both requirements would set the bar so high for diplomacy that failure was guaranteed. Privately, the Israelis did not conceal their desire for diplomacy to be pursued solely to demonstrate its failure and boost the efforts to pursue other, more confrontational options. The Political-Military Chief of the Israeli Ministry of Defense Amos Gilad told Under Secretary for Arms Control and International Security Ellen Tauscher that engagement is a good idea - "as long as you understand that it will not work."

Netanyahu’s approach did not lack critics back home in Israel. The Israeli newspaper Haaretz warned about the increasing distance between the two countries’ leadership and policies. “While the Americans are actively seeking a way to start a dialogue, Israel is preaching confrontation and the toppling of the government in Tehran,” the daily said in an editorial. “The new government should give Obama’s diplomatic initiative a chance.”

Obama prevailed in the first round. Netanyahu was shocked to find even some of his closest Congressional allies reluctant to challenge Obama’s Iran policy. Even the powerful America Israel Public Affairs Committee’s (AIPAC) efforts to pass sanctions through Congress prior to the talks fell short, prompting Andrew Glass of the Politico to write that AIPAC faced some “challenging times.” AIPAC’s failure resulted from the “rough consensus that had formed in Congress to give the Obama administration time and space” to pursue diplomacy, a senior Senate staffer told me. “Supporting Obama meant not supporting sanctions.”

In the end, all of Israel’s pressure against the diplomacy it so feared was for naught. The Iranians, it turned out, would do far more damage to diplomacy than Israel ever could. The massive human rights abuses following Iran’s fraudulent presidential elections significantly reduced Obama’s already compromised space for diplomacy. “After the elections, skepticism in Congress against our strategy turned to outright hostility,” a senior Obama official told me.

By the time diplomacy finally could take place in October 2009, pressure was enormous for instantaneous success. The Obama administration had neither space nor political capital to spend on prolonged talks. The Israeli demand for tight deadlines had de facto been adopted.

Diplomacy rarely yields immediate results, and the talks between the Permanent members of the U.N. Security Council plus Germany (P5+1) and Iran October 2009 were no different. The proposal to swap Iranian low enriched uranium for fuel pads for the Tehran Research Reactor ultimately did not win approval in Tehran, mainly due to infighting within Iran’s political elite. The deal fell “victim to internal Iranian politics,” then-Foreign Secretary of the United Kingdom David Miliband told me.

The damage to Obama’s gamble on diplomacy was so severe that advantage had now turned to Netanyahu in his next clash with the American president. But the game had shifted; it was no longer about diplomacy, but about sanctions. Would Obama have the time and space to secure sanctions at the U.N. or would Israel strike Iran’s nuclear facilities first? The Obama administration feared that Israel would start a war that inevitably the U.S. would get dragged into – against its own wishes.

The White House simply could not afford any Israeli adventurism with Iran. To drive the point home, Obama sent an army of high-level officials to Israel with the aim of pressing the Israelis to give Obama the time he needed to get a strong Security Council resolution. Between January and March 2010, Deputy Secretary of State Jim Steinberg, Undersecretary of Defense Michèle Flournoy, Defense Secretary Robert Gates, CIA director Leon Panetta, National Security Advisor Jim Jones, Chairman of the Joint Chiefs of Staff Admiral Mike Mullen, Deputy Secretary of State for Management and Resources Jack Lew, and Vice President Joseph Biden were all dispatched to Israel.

Mullen took the unusual step of convening a press conference to send a clear message to the Israeli public: an Israeli strike against Iran would “be a big, big, big problem for all of us, and I worry a great deal about the unintended consequences of a strike,” he said.

To make matters worse, in the midst of the jockeying over Iran, a major crisis erupted between Israel and the U.S. over a different issue mid-May 2010. Frustrated with the stalemate in talks between Israel and the Palestinians, Biden traveled to Israel to resume negotiations. But on the day that the vice president arrived, the Netanyahu government announced that another 1,600 apartments would be built in a settlement in Arab East Jerusalem.

The Israeli move infuriated the White House, which viewed it as a provocation and an insult. Such a blatant show of defiance by Israel against the U.S. served only to further weaken Washington’s position in the region, the administration believed. Biden himself was infuriated and had an angry exchange with Netanyahu, according to the Israeli daily Yedioth Ahronoth. “This is starting to get dangerous for us,” Biden told Netanyahu. “What you’re doing here undermines the security of our troops who are fighting in Iraq, Afghanistan, and Pakistan. That endangers us and it endangers regional peace,” he said, linking negative sentiments in the region against the U.S. to Israeli policies.

This enraged the Israelis, who categorically rejected any suggestion that the Israeli-Palestinian conflict fueled anti-American terrorism. Netanyahu’s brother-in-law Hagai Ben-Artzi even went so far as to accuse Obama on Israeli radio of being an anti-Semite. “When there is an anti-Semitic president in the United States, it is a test for us and we have to say: we will not concede,” he said. “We are a nation dating back 4,000 years, and you in a year or two will be long forgotten. Who will remember you? But Jerusalem will dwell on forever.”

The drama escalated further a week later during Netanyahu’s visit to Washington. The visit coincided with AIPAC’s annual policy conference. In just three days AIPAC coordinated a letter signed by a whopping 326 members of Congress and sent to Secretary Clinton, asserting that “it is in U.S. national security interests to assure that Israel’s security as an independent Jewish state is maintained.” And a bipartisan chorus of lawmakers spoke aggressively against the administration and in favor of the Israeli position at the conference itself. “If military force is ever employed, it should be done in a decisive fashion,” Senator Charles Schumer (D-NY), a close Obama ally, added to the anti-Obama chorus at the conference.

At the same time, only a few blocks away at the White House, Obama and Netanyahu were staring each other down. Obama had presented Netanyahu with a list of thirteen demands designed to end the feud. But Netanyahu would not yield, prompting Obama to abruptly rise from his seat and declare: “I’m going to the residential wing to have dinner with Michelle and the girls.”

Obama did leave the Israeli leader with an opening, though, telling him that he would still be available if Netanyahu were to change his mind. Netanyahu and his aides stayed in the Roosevelt Room in the White House for about an hour to prepare a response to Obama’s demands. But no resolution was found. The tensions with Israel and the debate inside the White House got so heated that leaks suggesting dual loyalty among some senior Obama administration officials emerged.

Fast-forward till today, and the crisis is even more acute. The Obama White House has pursued a strategy of maximizing pressure on Iran both through sanctions and by creating a credible military threat. The belief is that Iran only yields under such levels of pressure. The danger, however, is that Obama cannot control the Iranian reactions – and the risk of Tehran misreading Washington’s moves. After all, Obama is not seeking war, he is only signaling his readiness to go to war if Tehran doesn’t capitulate. Nor does Obama have the ability – or the political strength – to control Israel. All that is needed is a single spark and a major war can be triggered.

Whether Israel was behind the assassination of the Iranian nuclear scientist in Tehran last week or not, much indicates that the Obama administration fears that the intent was to spiral things out of control by goading Iranian retaliation. This might explain the unprecedented step by Secretary of State Hillary Clinton to – in person – quickly condemn the act and categorically deny any American involvement.

Clinton’s swift move might have saved the U.S. and the region from war for now, but it shows how risky the Obama administration’s Iran policy at this stage and its susceptibility to manipulation by hardliners in Israel, Iran – Washington.