BICOM

Key points

• The conclusion of the ten-month settlement freeze earlier this week passed without immediate diplomatic calamities. Although both sides have an interest in seeing the talks continue, there is a sense that the next few days may present the first serious crisis in this round of talks.
• There is a risk that overemphasising the settlement issue will completely derail the talks and hinder the ultimate goal of reaching a comprehensive Israeli-Palestinian agreement.
• The Arab League will meet next week to discuss the current state of the talks. This, in effect, allows international negotiators more time to seek a compromise on the settlement issue.
• Several statements by senior Israeli ministers and the participation of coalition MKs in West Bank events to mark the end of the freeze illustrate growing political unrest facing Prime Minster Benjamin Netanyahu.

What is the situation on the ground?

The official government moratorium on settlement construction expired on Sunday.  Netanyahu urged settlers to show “restraint and responsibility” and asked his ministers to avoid any public statements that could hamper efforts to keep the talks on track. Despite this, several ministers and Knesset Members, including some from Netanyahu’s own Likud party, joined public events throughout the West Bank to mark the end of the freeze.

For several practical and political reasons, however, a construction boom is unlikely to follow the end of the moratorium:

• Defence Minister and Israel Labour leader Ehud Barak holds the power to block the approval process and prevent new construction from taking place, since any new West Bank building requires the approval of the Defence Ministry.
• Construction capacity has been limited by the PA’s campaign to prevent Palestinians from working in the settlements. West Bank settlements have traditionally depended on Palestinian labour to carry out construction projects, and in their absence, building will slow significantly.
• Private investments in West Bank construction have declined in recent months due to the uncertainty about the future. For similar reasons, the settlements no longer attract non-ideological Israelis who seek affordable housing and improved quality of life in suburban settlements.
• The government moratorium on West Bank construction focused international attention on the issue of settlements, turning it into a central condition for negotiations, especially in the United States. In the past week several world leaders have urged Israel to maintain the settlement freeze, including President Barak Obama during his speech at the UN General Assembly. By continuing construction Israel risks facing sharp criticism on the world stage.

In a statement earlier this week, Housing Minister Eli Attais of Shas admitted that despite his support for the settlements, the events marking the end of the freeze were merely symbolic. “The real test is whether Defence Minister Barak will sign the building permits or not,” he said. This confirms the de facto continuation of the restraint policy even without official decisions passed in the cabinet.

What is the latest American policy for negotiations?

According to US lawmakers who were briefed by senior White House officials, Washington is placing significant pressure on the Israeli leadership to extend the settlement moratorium for an additional 60 days and ensure the continuation of talks. The Washington Institute reports that in return, the US president ensures a set of commitments on issues ranging from current peace and security matters to future weapons deliveries in the event that peace-related security arrangements are reached.

It is unclear yet where the American policy will turn if the current pressure fails. Obama’s statements at the UN General Assembly brought the settlement issue to the front of the stage and perhaps made a quiet deal harder to achieve. There is risk that an overemphasis on the settlement issue will shift attention away from the ultimate goal of sustaining negotiations and ensure that the sides continue to work toward a final-status agreement.

What are Netanyahu’s policy options?

It is still unclear how Netanyahu will respond to the growing international pressure on the settlement issue. The Israeli prime minister clearly seeks the continuation of talks and insists on his determination to make significant progress toward a deal within the one-year timeframe set by the Americans. The Israeli prime minister believes the official moratorium is not crucial for talks and that the most urgent goal should be the continuation of negotiations. To do so, Netanyahu may seek quiet understandings with Abbas and the US to avoid a confrontation with right-wing elements within his own party and the coalition. Such agreement could reinstate the limitations imposed during the Annapolis negotiations, which limited construction to existing settlement boundaries, preventing expropriation of Palestinian land and de facto blocking new projects from being approved.

Netanyahu has worked hard in recent months to establish his credibility and sincerity to progress the peace process. During a visit to Washington in July, Netanyahu won the trust of US President Barack Obama and, in last month’s summit in Washington, succeeded in launching direct talks with Abbas. Progress in talks provided Netanyahu some credit and temporarily alleviated some of the international pressure he faced in recent months. A crisis in the talks at this point is clearly not in Netanyahu’s interest.

Despite early fears, the conclusion of the ten-month settlement freeze earlier this week passed without immediate diplomatic calamities. The current focus on settlements must not be allowed to derail negotiations and any future policy will have to ensure the ultimate goal of keeping talks on track and moving steadily toward an agreement.

What is the political climate in Israel?

As Netanyahu faces growing international pressure to prevent the collapse of the talks, he is also facing a tough political reality at home. The participation of several Likud MKs and government ministers in end-of-freeze celebrations clearly dampened Netanyahu’s hope that the moratorium expiry date would pass without fanfare. Such embarrassments from relatively junior MKs are not an immediate threat to the prime minister’s leadership, but serve to remind Netanyahu of a small yet influential ideological core within Likud that will oppose any future compromise.

A speech by Foreign Minister Avigdor Lieberman at the UN General Assembly was yet another sign that the relative stability that characterised the first 18 months of Netanyahu’s government is over. While the prime minister repeatedly insists on his government’s commitment to reach an agreement within one year, Lieberman cast doubt that such an agreement can be achieved or implemented in the foreseeable future.

The timing of Lieberman’s speech was judicious, as the prime minister was intensely seeking a way of avoiding a diplomatic impasse. Lieberman is now effectively using Netanyahu’s diplomatic efforts and his apparent shift to the centre, to position himself as the authentic leader of the national right-wing and distance himself from the prime minister and his policies. The controversial speech was therefore intended for Israeli audiences more than for the senior diplomats and heads of state who attended the UN assembly.

So far, Netanyahu does not seem inclined to dismiss his foreign minister; the Prime Minister’s Office only clarified that the foreign minister’s speech does not reflect the government’s policy. Understandably, Netanyahu’s has no interest in a political confrontation that will bring significant changes to his coalition and even a possible split within his own party. Tzipi Livni, leader of the centrist Kadima party, has signalled her willingness to enter a coalition with Netanyahu as an alternative to Lieberman’s Yisrael Beiteinu. However, the prime minister will seek to hold on to his current partners as long as possible, knowing that a right-wing opposition – which at present lacks real leadership and political fervour – will flair up the Israeli street and make diplomatic progress during the talks significantly more difficult.

What will the Abbas do?

Like the period that preceded the renewal of direct talks in September, Abbas is seeking the backing of the Arab League on key decisions. As in previous instances, Abbas is looking for Arab legitimisation that will, to some extent, shield him from the criticism he is likely to face if and when a compromise on settlement construction is brokered.

Meeting Jewish-American leaders in New York recently, Abbas hinted that he will be willing to accept an American compromise even if it includes the continuation of limited settlement construction. Abbas previously suggested that he will not insist on an official announcement on the renewal of the freeze, but will require a de facto curb of construction on the ground.

At the same time, recent weeks have seen new attempts to revive Palestinian unity talks between Hamas and Fatah. Hamas leader Khaled Meshaal met with Fatah official Azzam al-Ahmed in Damascus to discuss reconciling the two groups in an effort to bolster Palestinian unity. Meshaal also met with Egyptian Intelligence chief Omar Suleiman to discuss the talks with Fatah.

The Palestinians are also caught between the need for progress on the diplomatic front and the need to overcome the deep divisions that plague Palestinian politics in recent years. However, there is a risk that a Fatah-Hamas unity deal will make progress toward a peace deal with Israel practically impossible, adding further intransigence to the Palestinian position and shackling Abbas to Islamic rejectionists.

Conclusion

The conclusion of the settlement freeze exposed some of the underlying political and diplomatic tensions that determine the sides’ limited room for manoeuvre. Any future progress on the diplomatic front will necessarily exacerbate the political pressure from opposition groups and raise the threat of terror. It is therefore crucial to remain conscious of the constraints and limitations that will inevitably dictate the decision-making process in coming weeks and understand the vital importance of preserving the political capital needed to achieve the final-status agreement.