In a comparatively rare public complaint, Saudi Arabia lashed out Wednesday at Israeli government policy, asking major powers involved in Middle East peace-making for “clarifications about Israel’s arrogant policy and its insistence on defying international will.”

Israel has been under fire repeatedly in recent weeks, for its alleged role in the killing of a senior Hamas official in Dubai in January, as well as for its continued construction of Jewish homes in East Jerusalem.

The former incident resulted in the expulsion Tuesday of an Israeli diplomat from Britain, over the use of forged British passports by the apparent killers of Mahmoud al-Mabhouh, widely believed in the international community to be agents of Israel’s Mossad. Meanwhile, the announcement of new building in East Jerusalem on the day that U.S. Vice President Joe Biden arrived in Israel this month sparked fury in Washington, which vocally expressed its annoyance.

U.S. President Barack Obama held a one-on-one meeting with Prime Minister Benjamin Netanyahu at the White House on Tuesday as Israel sought to smooth over the diplomatic spat with Washington.

Efforts to restore ties may have hit a roadblock, however, with the approval Tuesday of a further 20 East Jerusalem homes beyond the Green Line at the site of the former Shepherd Hotel.

The two leaders met for around 90 minutes. The White House had no immediate comment on what they discussed.

At the end of the meeting, Obama departed to his living quarters at the White House, while Netanyahu met with his advisers for over an hour in the Roosevelt Room. Netanyahu then requested another meeting with the U.S. president, and the two spoke again, one-on-one, for a half an hour.

“President Obama and the prime minister met privately for an hour and a half, the atmosphere was good,” Netanyahu spokesman Nir Chefetz said in a statement several hours after the meeting ended.

He said the two leaders’ advisers “continued discussions on the ideas raised at the meeting” and would hold further talks on Wednesday.

In spite of attempts on both the Israeli and American sides to bring the crisis to an end, there is still lingering tension and lack of trust within the Obama administration toward Netanyahu.

An American source close to the administration said that Obama and Secretary of State Hillary Clinton have decided to “test” Netanyahu and see whether he will carry out his promised gestures of good will toward the Palestinians.

According to an Israeli source who has discussed the matter with senior U.S. officials, Secretary of State Hillary Clinton and the president are dissatisfied with a letter given to them by Netanyahu, in which he detailed steps he is willing to take to restore American confidence in his government.

The prime minister and his aides said that a meeting with Clinton and Vice President Joe Biden on Monday, which served as a preamble to the meeting with Obama, was conducted in excellent spirits.

Israel had angered Biden by announcing plans for 1,600 new Jewish homes in east Jerusalem during his visit to the country two weeks ago.

An Israeli source noted that both Biden and Clinton used strong language and made it clear to Netanyahu that he would need to make further concessions to American demands in their meeting if trust is to be restored.

The same source said that the Americans are convinced that the answers Netanyahu had given them are insufficient.

Washington officials have also been irritated by Netanyahu’s attempts to draw equivalency between building inside Israel’s internationally recognized borders and in east Jerusalem.

“I think at one point the prime minister added that he did not see a distinction necessarily between building in Jerusalem and building in Tel Aviv. We disagree with that,” a White House spokesman said ahead of the meeting.

In a sign of White House concerns about lingering tensions, press coverage of the Oval Office talks was barred and no public statements were planned.

Before seeing Obama, Netanyahu told U.S. lawmakers he feared peace talks may be delayed for another year unless Palestinians drop their demand for a full freeze on Jewish building beyond the Green Line, including in east Jerusalem.

“We must not be trapped by an illogical and unreasonable demand,” Netanyahu said during his meeting with House of Representatives Speaker Nancy Pelosi and other congressional leaders, according to his spokesman.

“It could put the peace negotiations on hold for another year,” he said of the talks, suspended since December 2008.

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Saudi Arabia: World must intervene with ‘arrogant’ Israel

Britain, France, the EU and the Arab League have all added their protests against the decision.

The housing row has overshadowed a visit by US Vice-President Joe Biden which is meant to promote a new round of US-led negotiations.

He has condemned the move, saying it undermined trust in the peace process.

Israel and the Palestinians had agreed to hold indirect “proximity talks” in a bid to restart the process, which has been stalled for 17 months.

But earlier this week it approved 1,600 new homes for ultra-Orthodox Jews in East Jerusalem.

The international community considers East Jerusalem occupied territory and building on occupied land is illegal under international law.

Israel regards East Jerusalem – which it annexed in 1967 – as its territory, but Palestinians want it as the capital of their future state.

‘Ill-timed’

UK Foreign Secretary David Miliband described the Israeli move as “a bad decision at the wrong time”.

“It will give strength to those who argue that Israel is not serious about peace,” he said.

“Along with our EU partners, I condemn it as certain to undermine the mutual confidence we need.”

French Foreign Ministry spokesman Bernard Valero said the decision was “completely ill-timed”.

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Israel under pressure over East Jerusalem homes

In the last four days Mitchell has met Israel’s prime minister, Binyamin Netanyahu, four times seeking an agreement to stop settlement building in the Palestinian territories. Israel offered a freeze, but only with broad caveats. The Palestinians, taking an unusually firm line, said that was not enough.

Obama had hoped to bring Netanyahu and Palestinian president Mahmoud Abbas together at a meeting at the UN in New York next Wednesday. It would have restarted peace talks between the two sides for the first time in nearly a year, the first such Middle East negotiations under the Obama administration.

Mitchell met Netanyahu in Jerusalem yesterday, then crossed to Ramallah, in the occupied West Bank, where he met Abbas. He returned to Jerusalem to see Netanyahu again just before the Jewish New Year began at sunset, but could not bridge the gaps between the two.

“There is no agreement yet with the Israeli side, and no middle-ground solution,” Saeb Erekat, the chief Palestinian negotiator, said after the Abbas meeting. “A settlement freeze is a settlement freeze.”

Netanyahu is not due to leave for New York until Wednesday next week, but it is understood that if the Palestinians do agree to meet, preparations have been made to get the Israeli premier there earlier. The Israelis regard the Palestinians as the side holding up the talks.

Initially the US had asked Israel for a complete halt to settlement activity – one of the commitments in the US roadmap of 2003, which remains the basis for peace talks. However Netanyahu leads a right-wing coalition which strongly supports the settlers. Nearly 500,000 Jews now live in the West Bank and east Jerusalem, even though settlement on occupied land is illegal under international law.

Netanyahu offered a compromise: there would be a freeze to settlement building, but only for a limited period and it would not include east Jerusalem. In addition, Israel wanted work to continue on 2,500 homes where construction has started. In a final move, the Israeli government approved an additional 500 new settlement homes and said work would start or continue on those during the freeze.

Israel views that offer as part of a package: in return it wants Arab states to take steps towards normalising relations with Israel and for the Palestinians to meet their commitments under the roadmap, which include tackling militant violence and incitement.

US officials say they remain optimistic that Obama will finalise an Israeli agreement for a partial freeze on settlement construction when he meets Netanyahu in New York, and suggested that the unusually tough Palestinian position is in part last minute manoeuvring.

The Americans believe a deal to limit construction on existing West Bank settlements to about 2,500 new homes already planned will be endorsed. But they recognise that falls short of the Palestinian demand for a total freeze on expansion that must also include East Jerusalem. Diplomats in Washington say it would be difficult for Abbas to resist pressure from Obama to commit himself to talks, not least because the Palestinian government is heavily dependent on US and European money. However, it would be a setback for Obama if he were not able to at least get Netanyahu and Abbas in the same room.

At first Israel proposed a freeze lasting six months, but the US was hoping for at least one year. One Israeli official suggested yesterday that might be extended up to nine months. “Israel will agree to extend the freeze beyond six months – possibly nine months, but less than a year,” the official said.

Erekat, the Palestinian negotiator, said a meeting in New York might still go ahead but that it would be meaningless unless Israel committed to a full settlement freeze.

Yesterday the EU gave strong backing to the US efforts. In a statement, the Swedish EU presidency called on both sides to “fully engage in resumed negotiations”.
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Israel Settlements row throws Middle East peace talks into doubt

This came as the outcome of month long talks with Obama adminstration. Netanyahu has been under tremendous pressure from the United States to freeze all construction in East Jerusalem and the West Bank . This has been a very important milestone towards any kind of peace process to move forward in Mideast.. One less hinderance for the peace talks to move forward…