Israel’s temporary, partial settlement construction moratorium has finally expired without being renewed in any way. This is in spite of repeated American entreaties to the Israeli government to extend the moratorium and repeated Palestinian warnings that negotiations could not continue if building resumes. As things stand, the issue is unresolved and poses a serious threat to the future of negotiations, with the United States urgently looking for a compromise and the Palestinians putting off any final decision for at least another week.

However, it is likely that both parties will seek a way out, since neither can afford to be blamed for a meltdown of the negotiations at this early stage. The main weapon Washington has, since it prefers to keep itself at arm’s length from final-status issues for now, is the finger of blame it can point in either direction should the talks flounder. The Palestinians could be blamed at less political cost to the Obama administration and probably have more to lose in any confrontation with the US than Israel does. But Israeli Prime Minister Benjamin Netanyahu is also very concerned about appearing to be the party at fault. Both the Palestinian and Israeli leaderships have been in this situation over the past year and a half, and neither wishes to experience it again.

The strong Palestinian line on this matter is understandable but also problematic. There is no doubt it is a serious political problem for the Palestine Liberation Organization to continue direct negotiations with Israel without any extension of the moratorium. However, it would be even more damaging diplomatically and in terms of the Palestinian national interest for the PLO to end up in a major confrontation with Washington, especially if it were blamed for a breakdown in talks.

In fact, the settlement issue is not really so much a bilateral Israeli-Palestinian question as a bilateral Israeli-American one. It was the Obama administration that pushed the settlement issue when it began to strongly reengage Middle East peace efforts. The Palestinians were following the American lead, albeit with far less maneuverability. And the Palestinians on their own do not have leverage with Israel to have much impact on such a sensitive domestic political issue. As a practical matter, if the Palestinians are going to get anything out of the Israelis on settlements, it’s going to be the Americans who get it for them.

The crisis is both of very real significance and also entirely symbolic. The settlement issue is crucial because with every significant expansion of the Israeli presence in the Occupied Territories, the borders of a Palestinian state become more difficult to draw, and the – often belligerent – constituency in Israel with a vested interest in opposing territorial compromise is enlarged, entrenched and strengthened. At the same time, the idea of extending what was always a partial, temporary moratorium on settlement construction that never included Jerusalem and had many loopholes was essentially a political gimmick.

Since the moratorium did not ever have much impact on settlement activity, the best way out of the impasse may be to separate gimmickry from reality. On the one hand, influential portions of Israeli society want to see more settlement activity in the coming months. On the other, all sensible parties, including Israeli parties, must recognize that, however it is marketed, Israel cannot be allowed to continue to reshape the strategic landscape while negotiations are proceeding.

This suggests the usefulness of an informal understanding, enforced by the US, that Israel can build modestly in “consensus areas” generally understood to be the likely subject of a land swap between Israel and a new Palestinian state. However, Israel must not engage in significant new land expropriation in the West Bank, incursions into Palestinian neighborhoods of occupied East Jerusalem, or building in the “E-1 corridor” that would cut Jerusalem off from the West Bank.

Not only would such an understanding resolve, for a limited period of time, the strategic problems posed by continued settlement activity, it could and should buy time for negotiators to focus on fixing the borders of a Palestinian state, which would defuse the issue over a much longer term. However, being both informal and a compromise that gives something to both parties, but not what each really wants, the proposal leaves both leaderships facing potential domestic political challenges.

For all its obvious imperfections, such an informal compromise, if seriously enforced by the Obama administration, could defuse the crisis and buy significant and precious time for negotiators. One way or another, both Israel and the Palestinians in their short-term diplomatic and long-term national interests need to find a way to go forward with negotiations without allowing political gimmickry to cloud the vital strategic imperatives. Talks must continue, but Israel cannot continue to alter the strategic landscape as they proceed.