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The clash on the settlements between the Obama-Clinton administration and the Netanyahu-Lieberman (and Barak) government is not some petty haggling over expanding a kindergarten in Ofra or adding a balcony in Ma'aleh Adumim. It's an argument on the legal status of the West Bank settlements and East Jerusalem's Jewish neighborhoods and the sovereignty issue in the territories.

U.S. Secretary of State Hillary Clinton's public statement dismissing previous understandings with Israel on building in "settlement blocs" was not only intended to put her counterpart Avidgdor Lieberman in his place. Clinton knows that such an "understanding" means a revolution in American policy. A power that maintains that settlements are illegal and refuses to move its embassy to Jerusalem cannot recognize any of them.

Indeed, Dan Kurtzer, who served as U.S. ambassador in Israel during the Bush administration, confirmed in the Washington Post this week that all the stories about "understandings" with the United States on expanding settlements are groundless.

Kurtzer writes that Dov Weisglass, prime minister Ariel Sharon's adviser, asked for permission to build within the settlements' built-up areas. But this was never implemented. Kurtzer says Bush's letter to Sharon about recognizing Israeli population centers in the West Bank referred only to the final-status agreement, and even then with the Palestinians' consent.

Since 1967, the United States has made do largely with quiet protests against the settlements. Israel interpreted this as tacit agreement. Ehud Barak persuaded Bill Clinton not to make a big deal about the settlements. We're about to sign an agreement to annex some of them and the rest will be given to the Palestinians, he said. Clinton swallowed the bait, peace moved further away and the settlements continued to grow. Benjamin Netanyahu's readiness to blurt out "the two-state solution" won't budge Barack Obama from his position on the settlements.

The high-profile controversy has become a test of Obama's credibility and endurance in the eyes of the world, especially the Arab and Muslim world.

Jewish peace organizations and Israeli peace activists are making sure Netanyahu's representatives and the Jewish lobby don't feed Obama tales about "natural growth" and worthless commitments by Netanyahu.

1. Natural growth. When Sharon's government adopted the road map in 2003, Israel undertook to stop all construction in the settlements "including for natural growth" and to dismantle all outposts put up after March 2001. Since then the number of West Bank settlers has risen by 95,000 for a total of 300,000. It's hard to convince the Americans that Israel must plan its housing policy, not to mention fixed borders, according to the whims of adults who want to live close to mom and dad.

2. Netanyahu's commitment. He promised that "we have no intention of building new settlements or expropriating land to expand them." At least 100 new settlements, dubbed outposts, were built since Netanyahu's cabinet decided not to build new settlements in 1996. Since the '80s Israel has expropriated almost 1 million dunams, constituting 16 percent of the West Bank. In the past year Israel expropriated new land at least four times - some 275 dunams - Peace Now says.