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There is no crisis in relations between Israel and the United States, despite a lingering dispute - which will be settled "soon" - over settlement construction in the occupied territories, Israel's new ambassador to Washington said yesterday.

But a highly-respected Tel Aviv think tank said the two countries could be on a "collision course" unless Israel undertook practical measures to back up its statements that it wanted peace with the Palestinians.

"There is no crisis in Israel-U.S. relations. Here we are talking about disagreements over certain subjects, very, very specific," Ambassador Michael Oren told Israel Radio.

The State Department summoned Oren over the weekend to ask for clarifications over an Israel plan to construct housing units on the site of a defunct hotel in occupied East Jerusalem. Oren said there was "goodwill" between the two countries in attempting to solve the dispute.

"I am sorry to disappoint, but there is no crisis," Oren added. "We are talking about an extremely deep alliance (between Israel and the U.S.)"

But the Institute for National Security Studies, a Tel Aviv-based think tank, said yesterday afternoon that Netanyahu's recent qualified and conditional commitment to the establishment of a Palestinian state may not be enough to avert a clash with Washington, unless it "substantiates its desire to settle its conflicts with the Arab world with practical measures."

Presenting its annual Israeli strategic survey, the INNS said a stalemate on the Israeli-Palestinian issue "is the potential for tensions between the United States and Israel."

Israel, a summary of the survey said, had to formulate a strategy for negotiations with the Palestinians and with Syria and had to establish a "constructive exchange" with the U.S. on how to deal with Iran's nuclear ambitions.

Possible regional developments, such as the withdrawal of U.S. forces from Iraq or challenges to moderate Arab regimes, could force Israel to grapple with new threats and sources of instability, the institute said.