BICOM Analysis: PM Netanyahu’s dilemma between Jerusalem construction and US relations


Key Points

  • The dispute over construction in East Jerusalem reflects a genuine and deep-rooted difference between Israel, the Palestinians and the United States on one of the core issues that will have to be dealt with in the negotiation process between the sides.
  • The dispute provides a strong reminder that the disagreements between the sides are not just about the appropriate procedural framework for talks. The fault-lines between Israelis and Palestinians are substantive, and will surface in any serious negotiating process.
  • The diplomatic row also highlights the central political dilemma facing Prime Minister Benjamin Netanyahu – his need to successfully navigate the very real policy differences on core issues between the US administration and some of his coalition partners – while at the same time maintaining focus on the issues which he considers most vital to Israel.
  • In addition to differences on policy issues, PM Netanyahu also faces international scepticism regarding his sincerity in advancing negotiations toward a two-state solution. Consequently, the current government faces criticism even when its policies are similar to those advanced by previous governments.


Last week’s announcement of an Israeli plan to construct 1,600 new housing units in Ramat Shlomo in East Jerusalem, which was made during the visit of US Vice President Joe Biden, has led to serious strains in the relationship between the Obama  administration and the government of Prime Minister Benjamin Netanyahu. The announcement was met by a statement from Biden condemning the plan, and by an apology from Netanyahu for its timing.

The Prime Minister’s office has stated that Netanyahu was not aware that the announcement would be made during Biden’s visit. Following the announcement, the PM contacted Interior Minister Eli Yishai, who said that he had not been aware of the timing of the meeting of the planning committee. While it is impossible to verify Yishai’s claim, what may be said with certainty is that the Shas leader has in the past positioned himself as a firm opponent of all hindrances to the expansion of settlements and the right of Israel to build in Jerusalem. Cheap housing in Jerusalem is one of the key demands of the Ultra-Orthodox public which forms Yishai’s constituency. In addition, Yishai is engaged in an ongoing effort to maintain his leadership of Shas, in which he has sought to present himself as representing the more hawkish and right-wing element of that party. Whether or not Yishai was aware in advance of the Jerusalem Planning Committee’s announcement, he and his party, – whose support for the coalition is vital for its survival – remain firmly opposed to all restrictions on construction in Jerusalem.

As a Jerusalem neighbourhood, Ramat Shlomo is not included within the parameters of the ten-month settlement moratorium to which Israel has committed itself. Nevertheless, the US’s opposition to Israeli construction in East Jerusalem is longstanding, and as such, the announcement rapidly spiralled into a diplomatic incident. Washington clearly decided not to allow the perceived humiliation of the vice president merely to blow over. A subsequent phone call from Secretary of State Clinton to Netanyahu affirmed American displeasure. Clinton said that the Ramat Shlomo decision ‘undermines’ US policy, and called it a ‘deeply negative signal’

According to media reports, Secretary Clinton has now formulated a number of clear demands which the administration wants Israel to fulfil to end the current crisis. These are for:

  1. An Israeli investigation into how the Ramat Shlomo announcement came to be made when it was.
  2. The cancelling of the proposed construction.
  3. Gestures to the Palestinian Authority, likely in the form of prisoner release.
  4. Willingness to discuss core issues in the upcoming indirect negotiations.

Early Israeli hopes that the crisis would swiftly blow over appear to have been ill-founded. Rather, there is a sense that the US administration wishes to bring matters to a head – requiring Netanyahu to choose between accommodating its wishes, or those of the more right-wing members of his coalition. 

The impact of the announcement

Despite the regrettable setback to diplomatic efforts in the region, the latest incident is a useful reminder of just how real and fraught the differences between the sides are on core issues. This is an important corrective to the view that the solution to the conflict is known to all, and that what is therefore needed is simply finding the appropriate procedural framework for talks to take place. On Jerusalem – and also on refugees, the final border between Israel and a Palestinian state, future security arrangements – the differences between Israelis and Palestinians are substantive, and will surface in any serious negotiating process.

It is also important to bear in mind that despite the substantive differences between Israel, the Americans and the Palestinians, PM Netanyahu’s government seems to attract more criticism than previous Israeli administrations. Even when the current Israeli government takes far-reaching steps to advance negotiations, Netanyahu’s policies are still received with deep mistrust. This issue has plagued Netanyahu’s first year in office and continues to cast a shadow over Israeli policies and decisions. As such, the volatile situation on the ground is exacerbated by the lack of trust toward the Israeli leadership, making progress increasingly more difficult.

Netanyahu’s dilemma: Washington and Jerusalem

The heightened diplomatic tensions between Washington and Jerusalem highlight the dilemma facing Benjamin Netanyahu – namely, his need to successfully navigate between his will to maintain close relations with the US administration and avoid a spat with his coalition partners – while at the same time maintaining focus on the issues which he considers most vital.

For Netanyahu, the key issue is the regional threat represented by Iran’s nuclear programme, and its push for regional hegemony. The prime minister is aware that maintaining the close alliance with the US is absolutely vital to success in this regard. Many informed sources in Israel consider that Netanyahu’s willingness to commit to negotiations with the Palestinians represents a sort of quid-pro-quo with the US administration, undertaken in order to ensure the smooth relations necessary for a united response on Iran.

However, accommodating Washington’s position vis-à-vis the Palestinians on the peace process inevitably creates tensions between the prime minister and more right- wing elements in his own coalition – including right-wing Likud MKs, and more hawkish coalition partners such as Shas and Yisrael Beiteinu. The coalition arithmetic is such that the withdrawal of these parties could cause the government to fall, or require Netanyahu to create a new, less favourable coalition.

This is an ever-present potential contradiction which the prime minister can never fully resolve, and which therefore requires him to display a deft ability to avoid antagonising either party. The incident during the Biden visit illustrates what happens when Netanyahu fails to contain this contradiction, and the stark differences between the administration’s position on Jerusalem and that of members of the Israeli coalition becomes apparent.

The administration is in effect now saying to the government of Israel that it must choose between its desire to build in East Jerusalem and the maintenance of its friendship with the US. In an effort to carefully balance his relationships, Netanyahu could look to appease his right-wing coalition by making a behind-the-scenes deal with the US, rather than making a public U-turn regarding building in East Jerusalem.

Regarding Netanyahu’s own position on future arrangements in Jerusalem, the prime minister has unequivocally defended the right of Israel to build throughout what he regards as Israel’s unified capital city. At the same time, some Israeli analysts of both left and right note Netanyahu’s signing of the Wye Agreement and concession of parts of Hebron to Palestinian Authority control during his first period as prime minister – and conclude that he is more inclined to flexibility in reality than some of his more ideological statements might suggest.

Netanyahu told the Cabinet on Sunday morning “not to get carried away and to calm down”. However, the incident reflected real underlying policy differences, and hence further tensions down the line are likely, should the proximity talks begin.

Netanyahu is acutely aware that a major crisis is likely to erupt in September, at the point when the ten-month settlement moratorium concludes. At that point, the prime minister will need to decide whether or not to renew the moratorium. Depending on whether he attempts to renew the freeze or not, the prime minister is at that point likely to head into a row either with the administration or with the right-wing elements in his Cabinet and party. Within Likud, moves are underway to pass a resolution in the Central Committee prohibiting the renewal of the freeze.  Some sources suggest that Netanyahu may at that point allow the collapse of the present coalition – then moving either to allow elections or to build a new coalition with Kadima. What may be said with certainty is that the events of last week cast a spotlight on some of the substantive policy differences which contribute to the ongoing intractability of the Israeli-Palestinian conflict and the long impasse in attempts to find a resolution.


Beyond genuine disagreement over policies, the actions of the US administration reflect a frustration with Prime Minister Netanyahu’s government, which is also shared in European capitals. At the same time, it also reflects a stark toughening of Washington’s rhetoric, which explains some of the frustration in the Israeli leadership.

The current crisis is shaping up to be perhaps the most serious of Benjamin Netanyahu’s premiership. Nonetheless, it is important to remember that it is taking place along real and substantive fault-lines that have existed since 1967. The latest row illustrates the urgent need to acknowledge the differences between the sides and expect that similar hurdles will be part of the tough negotiation period ahead.