WASHINGTON - "We still have some work ahead of us," is how an American source summed up his impressions of Monday's White House meeting between Prime Minister Benjamin Netanyahu and U.S. President Barack Obama. On Iran, he said, the prime minister and the president were in agreement. But on the Palestinian issue, "we didn't manage a breakthrough on the two-state solution, nor did we reach an understanding on the settlements."

"They want us, quite simply, to freeze the settlements," an Israeli official said. His American colleague said the United States expects Israel to take action on the settlement issue in the next few weeks, enabling the United States to promote normalization with the Arab states.

American administrations that want to distance themselves from Israel have always put settlements on the agenda. The milder ones have made do with the familiar lip service of proclaiming the settlements an "obstacle to peace," while the tougher ones have demanded that Israel halt construction, so as not to create facts on the ground that would thwart the establishment of a Palestinian state in the West Bank.

Israel has always managed to evade this American pressure, and it has expanded the settlements under the pretext of natural growth. Ariel Sharon reached an understanding with the Bush administration that enabled Israel to engage in accelerated construction in the major settlements blocs, particularly around Jerusalem, while severely slowing, and unofficially even freezing, construction in isolated settlements east of the separation fence. The Olmert government continued this policy. As a reward for Israel's withdrawal from the Gaza Strip, the Bush administration also ignored Israel's foot-dragging on the evacuation of outposts.

The Obama administration wants to show that, unlike the previous U.S. administration, it does not dote on Israel, so it is no surprise that the settlements have once again taken center stage. This poses a problem for Netanyahu, since his coalition has a firm majority of right-wing MKs. Even the most leftist governments have never declared a settlement freeze. Sharon didn't either, even though he actually evacuated settlements from Gaza. So how can one expect the Netanyahu government, of all governments, to generously offer to satisfy the United States on this issue?

The Yesha Council of settlements has already launched a campaign demanding that Netanyahu allow increased construction in the West Bank. On the other hand, Israel's friends among congressional Democrats are distancing themselves from the settlements and declaring that they will not back Netanyahu if he insists on expanding them.

Netanyahu's associates say Americans and Israelis view the settlements differently. For Obama, they are a political issue: The president must show that he is pressuring Israel and extracting concessions from it in order to curry favor with the Arab world and Europe (as well as with his liberal supporters at home). For Netanyahu, they are a practical issue: If he promises a complete freeze on settlement construction, every newly closed-in balcony in the West Bank settlement of Ariel will make a liar out of him. Moreover, he has to take care of the existing settlements' basic needs.

So what can be done? In the follow-up talks to Monday's visit, the parties will try to find a formula that will satisfy Israel's commitment to freeze settlement construction (as laid down in the road map peace plan) without causing Netanyahu to commit political suicide. He will surely play for time and propose compromises such as allowing upward expansion - which does not require any additional land - or distinguishing between areas where construction will be permitted and areas where it will not.

The settlements will pose a far greater problem for Netanyahu than the two-sate solution, since on that issue, the Americans are ready to demonstrate understanding of his political constraints. Obama's envoy to the region, George Mitchell, has said privately that there is no need to demand that Netanyahu immediately proclaim acceptance of the two-state solution, since it's more important to continue building up the Palestinian Authority's institutions and security forces, and to improve the Palestinian economy by removing roadblocks. On these issues, Mitchell agrees with Netanyahu's approach. He also agrees with the prime minister that Israeli public opinion would be softened by Arab countries taking steps toward normalization.

In the Obama administration's division of labor, Mitchell and National Security Advisor James Jones are the bad cops. Both have previously served as envoys to Israel and the Palestinians, and been disappointed by Israel's foot-dragging and the impediments it raised. In contrast, Secretary of State Hillary Clinton is the good cop. Israelis who were present at her dinner with Netanyahu on Monday night liked what she told them: Hope is not a plan. For those who see Obama's efforts at dialogue with Iran and the Arab world as expressions of a naive liberal ideology, Clinton's realism was like a breath of fresh air.

But that will still not spare Netanyahu from having to find a formula for a settlement freeze.