MK Otniel Schneller (Kadima) lashed out Monday against the US demand for a settlement freeze, labeling it "extortion" and warning it could set back Israeli readiness for peace. In an interview with The Jerusalem Post, Schneller assailed Obama administration officials as holding beliefs shaped by "far-Left opinions outside of the Israeli consensus." Schneller, who has been involved in peace deals with the Palestinians and Jordan since 1994, sent a letter Sunday to Defense Minister Ehud Barak in advance of the minister's visit to the US in which he said he "searched for ways to find a meeting-point between Israel's desire to advance peace, the recognition of the agreement of the majority of Israeli people to recognize a Palestinian state, and the fatalism of America that is pushing us into a corner." "The most dangerous thing to the peace process is to push the Israeli public into a corner," he said. Barak is to meet in New York Tuesday morning with US Mideast envoy George Mitchell to discuss the settlement dispute between Israel and the US, at a time when key voices in both Jerusalem and Washington are trying to get their governments to "climb down" from their respective positions. Even as the US prepares to reiterate to Barak that he must freeze settlement activity, the draft 2009-2010 state budget calls for NIS 280 million to be spent on improvements for Route 1, in the area of Ma'aleh Adumim, located east of Jerusalem on the way to the Dead Sea. Schneller argued that the pressure to stop natural growth in settlements was a "fatal mistake," but said that although Israel "must go as much as possible in the direction of American interests through democracy, maintaining peace, continuing to work together with Abu Mazen [PA President Mahmoud Abbas], when the Obama government extorts the government of Israel by putting forward the question of natural growth and settlements opposite the Iranian question, it is extortion in the full meaning of the word." "What does the president of the United States think - that a nuclear Middle East is less dangerous than natural growth in a small settlement? What does the American Jew who voted for Obama think? To allow him to endanger our physical existence in Israel because my daughter is going to have a baby? "I think that the US government must stop its charge forward and instead go forward hand in hand with Israel on two channels - one, the Iranian channel, without any connection to the Palestinians, and two, the peace process with the Palestinians while understanding that the consensus within Israel is the most serious lever that can be operated toward that end," Schneller said. In his letter to Barak, Schneller argued that "in no case can one agree to freezing natural growth - not even temporarily. Beyond the ideological question (the right of people to give birth, to raise children) and beyond the humanitarian questions (preschools, clinics), the believability of Israel's government will be tested. There is no legal or public ability to carry out a complete freeze and there is no chance to prevent all building. America's temporary freeze will cause us to pay a moral price and we will be found untrustworthy opposite the Americans." Schneller said there was no legal basis for the government to stop private construction that had already been contracted, or to prevent building by those who already had made down payments, unless "we enforce the government's will in an illegal and anti-democratic manner. The American pressure endangers Israeli democracy. Human rights and the power of democracy are not dependent upon the interest of a particular nation." Instead, Schneller said, the American call to freeze all Jewish building in the West Bank were "unifying the Israeli public against the American demands." He weighed in on the debate regarding US agreements regarding building in the West Bank, arguing that the Americans had always understood that it was a necessity. As early as Camp David II, which he attended in 2000 as part of then-prime minister Barak's delegation, Schneller said, there was already an understanding. All of the argument regarding whether Israel would keep 8 percent or 12% of the West Bank meant that there was already a recognition that settlement blocs would be maintained, and that the debate centered around how much would be included. Barak has been saying in recent days that his talks with Mitchell were aimed at moving forward on a comprehensive agreement in the region. Within this framework, he said Monday before departing for the US that it would be possible to hold negotiations with the Palestinians, and that a solution to the settlement issue can be reached in these negotiations. After a meeting he held just prior to his one-day US trip to the US, Barak met with other inner cabinet members - their second meeting on the issue within 24 hours - in which two camps reportedly emerged. The first, which includes Prime Minister Binyamin Netanyahu and Intelligence Agencies Minister Dan Meridor, as well as Barak, is interested in a compromise - perhaps freezing construction for a limited time while allowing building to continue on housing units that are in an advanced stage - to avoid continued friction with the Obama administration on what they consider a peripheral issue. Such a move, according to this school of thought, would remove the Palestinian excuse for not restarting negotiations, and paint the Palestinian Authority as the "intransigent" party if it continued to refuse the talks, since they have made a settlement freeze a condition for renewed dialogue. The other camp, represented by Foreign Minister Avigdor Lieberman, Minister-without-Portfolio Bennie Begin and Strategic Affairs Minister Moshe Ya'alon, believes it would be a mistake for Israel to stop building in the settlement blocs that will likely remain in Israel's hands in any future agreement. They also are opposed to any pre-conditions to renewed negotiations. Netanyahu's adviser on the Palestinian issue, Yitzhak Molcho, who also attended, will accompany Barak to New York for the discussion with Mitchell. The Americans, for their part, are declining to rule out accepting a compromise along the lines of a temporary freeze. "We've been working with all the parties to try and come up with an environment conducive to the resumption of negotiations. And we look forward to sitting down and talking about what we can do to move this process forward," US State Department spokesman Ian Kelly said ahead of Tuesday's meeting. He called on both the Israelis and Palestinians to meet their road map obligations, which include a freeze on all settlement activity. "I'm not going to say we're not willing to compromise," Kelly said when pressed on whether that meant the US wouldn't accept such a proposal from Israel. "Inherent in the word 'negotiation' is, of course, sitting down and finding what one side, you know, what the other sides wants, and then working out a way to come to a resolution." Zalman Shoval, an outside adviser to Netanyahu who was in Washington last week and held talks with officials in both the current and previous administration, said his sense was that the Obama administration "was looking for a way out." Shoval, speaking to the Post from Paris on his way back to Israel, said it was becoming "clearer and clearer" that there had been "tacit understandings governing construction in the settlements" between the Bush administration and then-prime minister Ariel Sharon. He said that if Barak came to New York with some concrete suggestions about how to break the impasse, it could be the basis for an agreement, since the Americans were looking for a way off the "high horse" they had climbed to. While former US deputy national security adviser Elliott Abrams has publicly said there were understandings on the issue between the Bush and Sharon governments, Shoval said that behind closed doors, more senior members of the previous US administration were saying the same thing. He refused to name them. There are also signs the Americans are assessing that the focus on Israel and the settlement issue has not been paving the way to a changed dynamic between Israel and the Palestinians and the wider Arab world, and concession from the latter two, as the US had hoped. White House sources are now speaking more frequently about the need for the Arab world to take steps, and pushing back against the expectation that some have articulated that they expect the US to extract more concessions from Israel. In The Washington Post on Sunday, columnist David Ignatius quoted White House officials who "grumble about Israeli intransigence," and are "worried about 'squishy' Arab promises and demands for preconditions." He quoted a senior White House official as saying of the Arab leaders, "Don't keep faxing it in, saying I gave you a peace plan in 2002." In his column, Ignatius also wrote that Obama's "hardheaded strategy" on the settlements has one big flaw: "The Obama team is assuming that if it can pressure Israel into a real settlements freeze, the Arabs will respond with meaningful moves toward normalization of relations - which will give Israel some tangible benefits for its concessions. But that hope appears to be misplaced." According to Ignatius, while a settlements halt "would produce some limited Arab response," such as renewed trade or diplomatic contacts with countries like the United Arab Emirates, Qatar, Oman and others, "Saudi Arabia, the Arab kingpin, probably wouldn't offer major concessions until the negotiating process was further along." Meanwhile, new details have emerged about Netanyahu's meeting last week with French President Nicolas Sarkozy in Paris that paint a picture slightly less cordial than the one presented at Wednesday's press conference, in which the premier described his visit as a demonstration of an "unbreakable bond." According to Channel 2, in the closed-door meeting, Sarkozy told Netanyahu he "needs to get rid of" Foreign Minister Lieberman. "You need to get rid of this man," the French president reportedly said. "You need to remove him from this position." Sarkozy had apparently taken issue with some of Lieberman's fringe political stances, Channel 2 reported, and he said that opposition leader Tzipi Livni of Kadima was a far better choice for the position of foreign minister. In response, Netanyahu was quoted as telling the French leader that Lieberman "sounds really different" in private conversations. The French president, undeterred, reportedly retorted that even Jean-Marie Le Pen, the founder and president of the far-Right National Front in France, was a nice person in private conversations. The Prime Minister's Office denied the report, while a Lieberman aide blasted it. "If the words attributed to the French president are correct, then the intervention of the president of a respected, democratic state in the affairs of another democratic state is a grave and unacceptable thing," he said. "We expect that - regardless of political affiliation - all political bodies in Israel condemn this callous intervention of a foreign state in our internal affairs." Tovah Lazaroff and Jerusalem Post staff contributed to this report.