JERUSALEM (Reuters) – Israel’s relationship with  the United States, a defining feature of the troubled Middle  East, was under severe strain as diplomats scrambled yesterday  to save newborn US-brokered peace talks with the Palestinians.

A senior US official predicted “a dicey period here in the  next couple days to a couple of weeks” as Palestinians demanded  the reversal of a new Israeli settlement plan and Prime Minister  Benjamin Netanyahu’s coalition, which includes pro-settler  parties, reacts to unusually blunt criticism from Washington.

US Secretary of State Hillary Clinton called Israel’s  behaviour “insulting” after it approved 1,600 new homes last  week at a settlement in the Jerusalem area on the very day Vice  President Joe Biden was there to set a seal on relaunched  negotiations.

Biden told Reuters on Friday he believed Netanyahu was   sincere in seeking a deal to give the Palestinians a state and  that the premier understood that Israel had “no alternative”.

Though Clinton stressed that Washington’s ties with the  Jewish state were “durable and strong”, she had told Netanyahu  in a telephone call on Friday that he must act to repair the  relationship and show his commitment to an alliance which, she  reminded him, was key to Israel’s security in a hostile region.

An Israeli official, who declined to be identified, told  Reuters that Netanyahu was “conducting consultations with senior  cabinet colleagues.” He declined to give further details.

Asked what would be Netanyahu’s next move to try to restore  Israel’s relationship with its main ally, the Israeli official  said: “We’ll know only once the consultations are over.”
Clinton accepted that Netanyahu was taken by surprise by the  settlement housing approval granted on Tuesday by his interior  ministry, which is run by the pro-settler religious Shas party,  but she said the prime minister was still responsible for it.

Her spokesman said she told him it was a “deeply negative  signal about Israel’s approach to the bilateral relationship …  and had undermined trust and confidence in the peace process”.

In Washington, the Anti-Defamation League, which lobbies for  Israel with US lawmakers, called Clinton’s remarks on the  diplomatic debacle a “gross over-reaction”.

“We are shocked and stunned at the administration’s tone and  public dressing down of Israel,” the ADL’s Abraham Foxman said.

“We cannot remember an instance when such harsh language was  directed at a friend and ally of the United States. One can only  wonder how far the US is prepared to go in distancing itself  from Israel in order to placate the Palestinians.”

Obama is seeking better US relations with the Arab world,  which backs the Palestinians, as he seeks to bolster alliances  in the oil-producing hub, notably against Iran as it develops  nuclear technology and against Islamist enemies like al Qaeda.

Breaking the stalemate on a Palestinian state after 20 years  of talking might help challenge Arab perceptions that Washington  is in thrall to Israel, some analysts believe, although Israel’s  strong support in Congress tends to limit US pressure on it.

Aides to Palestinian President Mahmoud Abbas said he was  waiting to meet US President Barack Obama’s peace envoy George  Mitchell when he returns to the region in the coming days before  deciding whether to maintain his week-old commitment to starting  “proximity talks” with Netanyahu via US mediators.