In the current hullabaloo surrounding settlement construction, one side issue forced center stage is whether the US and Israel ever had tacit agreements on the matter. At issue is whether there was an understanding with the Bush administration that even though the road map called for an end to all settlement construction, including natural growth, Washington and Jerusalem understood that this was not to be taken literally, and that there were certain qualifications that made continued construction possible. Some, like former US national security adviser Elliott Abrams and Ariel Sharon's bureau chief Dov Weissglas, have said that these understandings did exist. Others, such as US Secretary of State Hillary Clinton and former US ambassador Dan Kurtzer, dispute this, saying that - as Clinton said - "there is no memorialization of any informal and oral agreements." For some, the issue is academic, of no real consequence now that there is a new administration in Washington which sees things radically differently than the previous one, and which can chart new policy. Not so for Ron Dermer, Prime Minister Binyamin Netanyahu's director of policy planning and one of his closest advisers. Dermer, in his first on-the-record interview since moving into the Prime Minister's Office with his boss just under 100 days ago, said the issue is significant because the impression has been created that Israel - since the road map - has somehow been hoodwinking the US and the world by building in the settlements, that it was just not abiding by its obligations. "This is just not true," said Dermer, sitting in his office just a few steps from the prime minister's. "We didn't hoodwink, we didn't cheat. We were very open and honest." Granted, Dermer said, the road map calls for a construction freeze, but the Sharon government's acceptance of that document was based on understandings with the US as to exactly what that meant. The Israeli position, confirmed by Abrams, is that there were certain parameters within which building could continue, such as if it took place within the existing construction lines of the settlements and if no new settlements were built or no new Palestinian land expropriated. This was a "kind of a side understanding" with the US, Dermer said, but one which Israel relied heavily upon in making some key decisions, like disengagement from Gaza. "Look, Israel is a country that relies not just on written agreements but also on understandings that we have, that affects the decisions that we make," the affable and articulate Dermer said. "And when a prime minister and a president have an understanding together, it has meaning. And it affects the decisions that the prime minister of Israel will make afterward." He was referring specifically to the famous letter president George W. Bush gave to Sharon in 2004, prior to the cabinet debate on disengagement - a letter in which he said that America's position was that there would be no right of Palestinian refugee return to Israel, and that new realities on the ground would have to be taken into consideration in drawing up future boundaries, something Israel understood as US acceptance that the large settlement blocs would remain in its hands. "Sharon," Dermer said, "went to his cabinet after receiving the letter, and said, 'We received certain assurance from the United States.' And he told the ministers, you can vote against the disengagement. But if you vote against the disengagement, what you are basically doing is voting against those assurances. The assurances have to do with the settlement blocs in a future agreement, and with the issue of Palestinian refugees not being able to return to Israel. These are important achievements, and if you are voting against me now, you are voting against those things too." Those understandings, and that letter, had a huge impact on the government's decisions at the time, Dermer said. "Israel's government in good faith was relying on those understandings. Israel was operating in good faith on the settlements the entire time." That was then. Now, Dermer said on the day when Defense Minister Ehud Barak was in New York discussing the issue with US Mideast envoy George Mitchell, he believes that Washington and Jerusalem can reach a compromise agreement. "Look, I think this administration is very reasonable," Dermer said. "I think that reasonable people can understand that when you build within a construction line, you are not prejudicing negotiations." Although he said he doesn't know exactly how the issue will "play out," he said that there has never been a government that has agreed to "zero construction" in the settlements, and that he didn't see his boss agreeing to one now. "I don't think it will happen because it is impractical." Ironically, this dispute - which has grabbed so much media attention during Netanyahu's first three months - is not one the prime minister initiated, but rather one that was forced onto his agenda. And, Dermer said, it has been twisted way out of proportion. There is a huge gap, he said, "between the conversation that takes place in the press on the settlements, and what is said in the diplomatic arena on these issues." Because of the strength of the US-Israeli relationship, when there is disagreement on any one matter, it is necessarily blown way out of proportion, he added. For instance, Dermer sat in on six or seven hours of talks on Netanyahu's recent trip to Italy and France, and said the settlement issue came up "for about four minutes." It is an issue for the press more than anything else, he said. Be that as it may, a settlement freeze is now cited by the Palestinians as a precondition to talks with Netanyahu's government, something Dermer finds difficult to understand. "The Palestinians have added the settlement freeze as a new demand, something they didn't demand of the previous government," he said. "You have a coalition - though a unity government - that is two to three steps to the right of the previous coalition. And not only is Abu Mazen [Palestinian Authority President Mahmoud Abbas] not keeping to the same demands he had before, he has actually raised the stakes and added a new demand. He never demanded of [former prime minister Ehud] Olmert a total freeze. this is a new demand, and there is a question of whether the Palestinians are really committed to entering into a process with us." Dermer said he hoped the Palestinians begin to "change their minds," because Abbas's policy of sitting with folded arms is simply wasting time. "The best way to change their mind," he said, "is to have people around the world, who are sometimes not hesitant to say what they demand of Israel, to be equally forceful in telling the Palestinians to stop playing these games and get into negotiations, and to start building an infrastructure of peace from the bottom up. They have to be equally forceful in that." As to whether he thinks the world will indeed call the Palestinians out on the matter, Dermer said "it might, it very well might. I don't know. We are still in the wake of the Bar-Ilan speech, and there were many questions about how the prime minister saw the end of the process and I think those questions have been resolved." For Dermer, the Bar-Ilan speech was one of Netanyahu's major achievements of his first 100 days as he was "very successful at expressing the broad consensus that exists today in Israel. I would argue that he's the first prime minister who has actually expressed a vast consensus in Israel." According to Dermer, who is backed up by various polls, Netanyahu's speech resonated well with 70 percent of the public because he reiterated basic truths that most Israelis agree with: that Israel is the nation-state of the Jewish people and that a future Palestinian state must be demilitarized. These issues are not new, Dermer said, "but no one has put them front and center before." Regarding the demand that the Palestinians' recognize Israel as the nation-state of the Jewish people, Dermer said this is something Netanyahu "will stand on, and there will not be a way to get out of this. It is important because it goes to the core of the conflict." Some argue that this is a "childish" demand, and that Israel doesn't need Palestinian legitimacy. But Dermer would retort that such a claim misses the point. For both him and Netanyahu, accepting that the Jews have a legitimate historical claim to a state in Israel is a Rubicon that the Palestinians have never been willing to cross, but which is a necessary ingredient in finding an end to the conflict. "The core of the conflict is that the Palestinians think that we stole their house," Dermer said. "That's what they think. So if you are dealing with a thief, no matter what agreement you are going to make, if you think that someone stole your house you are not going to make peace, because you are not going to feel that such a peace is legitimate." The fact is, Dermer said, that Israel did not steal the Palestinians' homes, but rather that this is the land "where the patriarchs prayed, the prophets preached and the kings of Israel ruled." When Yasser Arafat said at Camp David that there was no temple in Jerusalem, he was wrong, he was lying, Dermer said, adding that until there is a "reciprocal recognition of rights" - until the Palestinians recognize a Jewish historical claim here - there won't be peace. Israel has recognized Palestinian rights, a product of the fact that they lived here for centuries, but they have yet to recognize Israel's, he maintained. "It is the most basic thing for the Palestinians, to say yes the Jewish people have rights to a state in this land," he said. "Once they cross that Rubicon, all the other issues that were not the original sources of the conflict [such as settlements, refugees and Jerusalem], all of those can be resolved, because they will say your presence here is essentially just. If the world tries to get away from this issue, you are never going to resolve it." Dermer said that considering Netanyahu's deep roots in the revisionist philosophy of Ze'ev Jabotinsky, for him to accept a Palestinian state in any form and "to recognize that they have rights that entitle them to certain things" was an enormously difficult step. But, he said, Netanyahu took that stride at Bar-Ilan, making him in that sense the "last leader in Israel" to make that step. But at the same time, he said, "you haven't had the first person among the Palestinians to cross that Rubicon. And once they do it, the effect will be very dramatic." The other truth that Netanyahu laid bare in his Bar-Ilan speech, Dermer said, was that a future Palestinian state would have to be demilitarized. Moreover, Netanyahu said the international community would have to provide guarantees for this, although he did not explain what he had in mind. Netanyahu wasn't talking about the introduction of foreign forces, as some mistakenly concluded, Dermer said. Rather, what Israel expects is that the international community give legitimacy and accept the principle of the "few restrictions on Palestinian sovereignty that are essential to Israel's security, so that in the future there will be no disagreement regarding these elements." This is necessary, he indicated, so that if the Palestinians breach the understandings on demilitarization, Israel would have international legitimacy to take action to reverse the situation. He said that he does not understand why people who support the construct of two states for two peoples would be opposed to this notion of demilitarization. "Palestinian self-determination does not require an army, it does require a police force and a security force that can effectively fight terror, but it doesn't require tanks, artillery or missiles," he said. "Palestinian self-determination doesn't require that they control the airspace, because that could be a big danger to people flying into Ben-Gurion Airport, and who could go off course 500 yards and someone has the right, because you encroached on their airspace, to take action. "I don't think Palestinian self-determination gives them the right to import Grad rockets and heavy weapons, and we have to have an effective mechanism to prevent that. And I don't think it gives them the right to make military pacts with the likes of Iran. So there are a handful of powers traditionally associated with sovereignty which have to not be given to the Palestinians in a final agreement, and these restrictions have to be backed by international guarantees." While Dermer believes that Netanyahu's speech reflected the Israeli consensus, he himself - because he is an immigrant from America only in the country for 13 years, and because he is religious - is deemed to some as an outsider. Indeed, the 38-year-old father of three boys under the age of five has been the target of some snotty barbs by leading journalists bewailing that Netanyahu is surrounded by "English-speaking kippa wearers." The characterization is off the mark, since there is only one other native English speaker in Netanyahu's inner circle, Ari Harrow, who is in charge of the prime minister's schedule. There are, however, three other kippa wearers, chief of staff Natan Eshel, Gil Sheffer, who deals with Netanyahu's visits, and Harrow. Dermer said that the focus on the religious demographic is a sign of an unfortunate narrow-mindedness among some of the country's elite. As to how he feels when he reads the snide comments about his kippa or accent, he replies, "It makes me feel sorry for the people who write it. I think they are pathetic. It doesn't create any insecurity in me, because I am very proud of who I am. When people question it, it shows how superficial and shallow they are. And I think it is sad that in the Jewish state it should be a topic of conversation that there are religious people who work for the prime minister." Dermer praised Netanyahu for not being "squeamish" about "speaking in the historic language of his people, not just the Hebrew language. It is commonplace for the president of the US to quote Isaiah. In Israel, in the Knesset, it is quite rare for an Israeli politician, to quote Isaiah. I think that is a tragedy." Many, but not all, of the elites "are very educated people but ignorant when it comes to their own heritage," Dermer said. "And I think that is a tragedy. Shakespeare is wonderful, and I think every home in Israel should have a Shakespeare. But the greatest book ever written was the Bible. And the difference between Shakespeare and the Bible for the Jews is that Shakespeare was English, but the Bible is ours, and to not understand what that means, and how powerful that is when you are sitting on those assets [is unfortunate]. They say that Israel has no natural resources except for the talents and minds of its people. That is true, but we have this unequaled heritage in this country, and you have very few leaders who in the past have tapped into it." Netanyahu, while secular, has tapped into that, according to Dermer, and he said this is something that should be praised, not denigrated. Nor, said Dermer, who hails from Miami Beach, where both his father and later his brother served as mayor, does he feel the need to apologize for his American roots, or that Netanyahu should be castigated for a couple of American-born advisers around him. "The prime minister is someone who has a great affinity for the US, I think, a great love for America," Dermer said. "He sees it as the embodiment of certain ideals. I think he connects to it. "I think the people who were born and raised in the US and came here are very different than a lot of the immigrants who came from other countries. Because we were not running away from anything. Those from the US tend to be some of the most idealistic immigrants. I think the prime minister may see that people have come here from the US feel that it really is all about the country, not about them." The full transcript of this interview with Ron Dermer can be read on jpost.com.