The Obama administration refused to let go of the Ramat Shlomo construction controversy Sunday, with two top aides to US President Barack Obama slamming Israel amid a growing sense in Jerusalem that Washington was using the issue to squeeze diplomatic concessions from Prime Minister Binyamin Netanyahu.

While the Prime Minister’s Office would not confirm the reports, it is widely believed that the US is now pressing Netanyahu to cancel the entire 1,600 housing-unit project in Ramat Shlomo.

In addition, Washington wants Israel to make a confidence building measure – such as releasing Palestinian prisoners – toward Palestinian Authority President Mahmoud Abbas before US Mideast envoy George Mitchell arrives later this week to try to get proximity talks off the ground; and to agree that the proximity talks will deal with core issues of the negotiations, and not only technical matters as a way into direct talks, as Israel had demanded.

Two days after US Secretary of State Hillary Clinton scolded Netanyahu in a 45-minute phone conversation for the announcement, while US Vice President Joe Biden was in Israel, of plans to build 1,600 units in Ramat Shlomo, and later telling CNN that Israel had insulted Biden and the US, Obama’s top adviser David Axelrod expanded on the theme, telling ABC’s This Week the announcement was an “affront” and an “insult.” 

“What it did was it made more difficult a very difficult process,” Axelrod said, adding that it “seemed calculated to undermine” the proximity talks.

“Israel is a strong and special ally. The bonds run deep. But for just that very reason, this was not the right way to behave. That was expressed by the secretary of state, as well as the vice president,” Axelrod said.

“I am not going to discuss what diplomatic talks we’ve had underneath that, but I think the Israelis understand clearly why we were upset and what, you know, what we want moving forward,” he said.

Asked twice whether the issue put US troops lives at risk, Axelrod side-stepped a direct answer but said, “I do believe that it is absolutely imperative, not just for the security of Israel and the Palestinian people, who were, remember, at war just a year ago, but it is important for our own security that we move forward and resolve this very difficult issue.” 

Netanyahu, meanwhile, tried to put forward a business-as-usual posture at Sunday’s cabinet meeting, calling for calm and instructing his ministers not to publicly discuss the matter.

“We open up today’s newspapers and read all kinds of comments and analyses,” he said.

“First of all, I suggest that we don’t get carried away – that we calm down. What did my friend, Bennie Begin, say? ‘I was a youth and have matured.’ We know how to deal with these situations – with equanimity, responsibly and with seriousness.”

Netanyahu, for the fourth time, apologized for the incident, saying that it was an innocent – though hurtful – mistake, but not done intentionally. He said that there was no need to say any more on the matter, and requested that his ministers also not elaborate on the issue.

“But it is of utmost importance to understand that Israel and the US have common interests, and we will act according to Israel’s vital interests,” he said.

One source inside the Prime Minister’s Office said he was unaware of any intention by Netanyahu either to roll back the Ramat Shlomo project, or declare a moratorium on construction in east Jerusalem, something the Palestinians have been demanding for months.

The source denied reports that before the Ramat Shlomo brouhaha erupted there were informal agreements between Mitchell and Netanyahu’s aides that once talks began Israel would make no announcements of new construction in east Jerusalem.

White House Press Secretary Robert Gibbs, speaking on Fox News on Sunday, characterized Netanyahu’s comments Sunday as a “good start,” but said more needed to be done to rebuild trust.

“I think what would be an even better start is coming to the table with constructive ideas for constructive and trustful dialogue about moving the peace process forward,” Gibbs said.

“There’s no doubt that events like last week weaken the trust that’s needed for both sides to come together and have honest discussions about peace in the Middle East,” he said. “So there’s no doubt that that was not a bright spot for the Israeli government.”

Israel’s Ambassador to the US Michael Oren was summoned to the State Department on Friday afternoon for a meeting with Deputy Secretary of State James Steinberg, where he heard the same message of American disapproval and outrage that Clinton delivered to Netanyahu the same day.

“They had a very direct and candid conversation. It wasn’t just hearing. It was also voicing. He didn’t come just to listen,” an Israeli official said of Oren’s visit to Foggy Bottom.

Oren has worked the phones to the White House, State Department and Jerusalem since then in a bid to help cool temperatures.

“Everybody wants to calm things down,” the Israeli official said.

Still, he said, “There is confusion in terms of where the administration stands, especially since we were led to understand that after Biden’s visit things were under control. We were under the impression that we’d managed to ride the story and then on Friday we were surprised.”

Meanwhile, Egypt on Sunday evening called on the international community to continue pressuring Israel over the issue and to force Jerusalem to “stop its provocative moves,” Israel Radio reported.

The international criticism must continue so that the world knows Israel is not interested in peace and is working to undermine peace efforts, after the Palestinians and Arabs proposed to hold indirect peace talks, Egyptian Foreign Ministry spokesman Hossam Zaki was quoted as saying.

Zaki reportedly went on to say that Washington now understood that the Israeli government was not working to promote peace.

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