Intensifying the bitter diplomatic dispute with the Obama administration over the issue of a settlement freeze, Likud cabinet minister Dan Meridor insisted on Tuesday that Israel and the United States had a clear oral agreement dating back six years permitting Israel to build within the construction lines of existing settlements. Meridor, a minister without portfolio who is responsible for national defense and diplomatic strategy, said Israel had honored its road map commitment to a settlement freeze within the parameters agreed with the US, and that the Obama administration's refusal to acknowledge and abide by those understandings was deeply problematic. "It is of great importance to us that what the [previous] US administration agreed to is not overlooked," Meridor said, at a press briefing in Jerusalem organized by The Israel Project organization, adding that the credibility of future agreements and understandings was at stake. "This is how countries take upon themselves obligations," he said, stressing what he called the "oral understandings" - regarding what construction would and would not be permitted under the terms of the freeze - were reached "by America and Israel," and did not lapse because of the change of administration. "The agreement is binding on us and them," Meridor said. He added: "It was agreed that the Israelis can go on building within certain parameters. That's what happened, and no word was said against it in six years." Meridor said Israel was anxious to resume substantive negotiations with the Palestinian Authority and that "the status quo is not a good option for us. We want to move ahead and find solutions." But he said PA President Mahmoud Abbas had yet to take positions that would enable a solution. "Abu Mazen is our partner," he said. "The Palestinian Authority is our partner." But he also quoted PA negotiator Saeb Erekat, who said recently that the Palestinians had no incentive to compromise, since so long as they remained obdurate Israel offered increasingly generous terms. "Whenever we said no, the Israelis gave us more," Meridor paraphrased Erekat as saying. "If that's their approach, there will never be an agreement." Noting that former prime minister Ehud Olmert had offered exceptionally generous terms to Abbas, and still been rebuffed, he indicated that Prime Minister Binyamin Netanyahu would be less forthcoming. "Does anybody think Netanyahu will give more than Olmert gave? Is that realistic?" Abbas, he said, needed to understand "that there's more that he has to give." The Olmert government "went all the way" to meet Arab demands on all the outstanding issues, and yet received "no positive response from Mr. Abu Mazen," he said. Asked whether he believed this government could reach an accord, and whether it could be done without a Palestinian capital in at least part of east Jerusalem, Meridor said a deal was possible - if the Palestinians accepted the legitimacy of Israel. He said "Jerusalem has never been the capital of a 'Palestine' or an Arab country," and made clear he hoped it would not become one. Referring to an address given last June by Barack Obama to AIPAC's policy conference in Washington, when the president was still a candidate, Meridor said he shared the vision of an "undivided" Jerusalem. He acknowledged that Israel and the US had differences over the fate of the city, but said Israeli governments for 42 years had regarded it "as part of Israel." The oral understandings about settlements did not apply to Jerusalem, where Israeli law applied in full, he said. By the same token, "full equality" under that law should apply to Jews and Arabs in the city, he said. Meridor, who works out of the Prime Minister's Office, also expressed, for the first time, the government's specific endorsement of the road map formula for Palestinian statehood. He noted that Netanyahu had committed Israel to honoring all previous international agreements, and stressed that the road map was one those agreements binding on the government. Asked by The Jerusalem Post whether the Palestinians had met their commitments under phase one of the road map, including anti-terror obligations, he said there had been a reduction in incitement against Israel and that the PA troops trained under the supervision of US Lt.-Gen. Keith Dayton had made progress in imposing law and order in the West Bank. But far from the PA collecting illegal weaponry, as required by the road map, he went on, Palestinian weaponry had now fallen into the hands of Hamas, which had taken over the Gaza Strip. He said he hoped to see more Arab nations follow Egypt and Jordan in moving toward acceptance of Israel, and that Israel sought neighborly relations. "We want to be a more normal part of the world." Meanwhile, Meridor's brother Sallai, recently returned from serving as ambassador to the US, said Tuesday that despite being at odds over the question of the settlements and continued construction in east Jerusalem, the United States and Israel still share a unique relationship. He said that he did not view the latest round of criticism from Washington as evidence of a full-blown "confrontation" between the two countries. "All in all, the Israel-US relationship is a very strong relationship," Sallai Meridor told Israel Radio. "This disagreement is real, this disagreement isn't constructive, but one shouldn't examine the Israel-US relationship solely through the prism of this disagreement." He added that both Israel and the US "took stances over the past months that do not necessarily serve the interests that are shared by both countries... At a certain point we tried to distance ourselves from our previous commitment to a Palestinian state - we've since corrected this with the prime minister's Bar-Ilan address [on June 14] - and the Americans tried to back out of various understandings on the matter of the settlements. This is not constructive... because what happened is that, today, both the Arabs and the Palestinians are refusing to resume negotiations." Meridor attempted to explain the reasons behind the tougher stance of the current US administration and its readiness to publicly press Israel on the settlement issue. "The US is in a certain sense recovering after a time of post-trauma over September 11. The Obama administration is making a very large effort to reposition the US in the world, and a very large effort to forge new ties with the Muslim world and the Arab world... They think that if they succeed, it will also benefit Israel's interests." He said that Israel should live up to its commitment to evacuate unauthorized outposts in the West Bank, stressing, however, that the questions of natural growth in existing settlements and of further construction in east Jerusalem were in a separate category. "There is a difference between US expectations of us regarding the outposts, about which we gave a full commitment, and expectations having to do with the settlements in Judea and Samaria, where there were understandings that we had the right to expect the Americans not to stray from, and Jerusalem, since it was clear to the Americans all along that Israel considers Jerusalem to be in a different category," Sallai Meridor said.