Many Israelis, and many of Israel's firmest supporters, believe Obama's insistent focus on a settlement freeze to be wrongheaded. But plainly the president sees Netanyahu's obduracy on the issue, and on the subject of Palestinian sovereignty, as a major irritant as he reaches out to the Muslim world. With the Iranian threat looming ever closer, is this a fight our prime minister could, and should, be avoiding? *** "In light of new realities on the ground, including already existing major Israeli population centers, it is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949, and all previous efforts to negotiate a two-state solution have reached the same conclusion." - From an April 14, 2004, letter to prime minister Ariel Sharon by US president George W. Bush. "Within the agreed principles of settlement activities, an effort will be made in the next few days to have a better definition of the construction line of settlements in Judea and Samaria... The Israeli government remains committed to the two-state solution - Israel and Palestine living side-by-side in peace and security - as the key to peace in the Middle East." - From an April 13, 2004, letter to US secretary of state Condoleezza Rice by prime minister Ariel Sharon's bureau chief, Dov Weissglas. A man walks into a used car lot, tells the salesman what he's looking for and is shown an appropriate vehicle. The salesman names his price, sees that the buyer is hesitant, so adds: "I'll throw in a free CD player as well." The client promises to think about it, leaves, and comes back the next day. "I'm not going to take the car," he says. "But I will have the CD player." That, in a motoring-sales nutshell, is how the critics of Binyamin Netanyahu - critics within the administration of President Barack Obama, and within the ranks of the center-left Israeli opposition - regard the prime minister's complaint that that the US is being "unreasonable" in demanding a complete freeze, with no exceptions for "natural growth," to settlement building. Netanyahu, they say, is on shaky ground when he protests that the Americans are abrogating understandings which for years saw them turn a blind eye to limited building within existing settlement "construction lines." Such understandings were indeed worked out behind the scenes by well-coordinated officials in the Israeli and American governments, and were vaguely referred to in such documents as the George W. Bush letter to Ariel Sharon and the Dov Weissglas note to Condoleezza Rice quoted above. But they were framed in the context of a firm Israeli commitment to partner the Americans and, should one emerge, a like-minded Palestinian leadership, in the quest for a viable two-state solution. Today, in contrast to his predecessors including Sharon, the critics point out, Netanyahu is adamantly refusing to utter the phrase "two-state solution," insistently withholding an explicit endorsement of that vision even in principle. And therefore, they conclude, he has no grounds for complaining that Obama is departing from historic US commitments on the details when he is departing from historic Israeli commitments on the fundamentals. He can't have the CD player if he isn't buying the car. It is by no means clear that Israel ever actually completed the effort promised by Weissglas in April 2004 to provide "a better definition of the construction lines of settlements" within which Israel was to limit all further building in Judea and Samaria. It seems more than likely, in any case, that Netanyahu has nothing planned that would radically depart from the previous, tacitly accepted parameters for ongoing settlement construction. There is every sense that, like his recent predecessors, he does not envision establishing new settlements, taking control of further disputed territory or re-introducing government-funded incentives to encourage Israelis to move to Judea and Samaria, although he does not oppose Israelis moving to the major settlement blocs of their own volition. But in the absence of an explicit endorsement of the two-state solution, there is, all-too plainly, no willingness on the part of the Obama administration to quietly live with the gradual expansion of the settlement enterprise until or unless a viable Palestinian partnership, and a substantive peace process, take shape. As one veteran Israeli government insider put it this week, "The Americans have always opposed Israeli settlement activity. Always. But in recent years, the critical rhetoric on this from Washington, on a one-to-10 scale, never went higher than four. Today it's at eight." Obama's presidency is quickly bringing the anticipated reassessment of America's interests and orientation. His Israel-free Middle East visit, marked by Thursday's painstakingly calibrated address in Cairo, emblemizes a thorough and daring effort to usher in a new era of conciliation with the Muslim world, including even the proponents of the most extreme interpretations of Islam - uncompromising ideologues hitherto utterly irreconcilable to the West, determined to widen their sphere of influence, and reading a desire for engagement as weakness. Obama is adamant that this high-stakes effort can only benefit Israel - as indeed it would... if it were to succeed. And in this context, Netanyahu's obduracy on the two-state solution and on settlement building is a real irritant to the US, perceived by Obama to be undermining his credibility as he reaches out to the region. THE DISTRESS within the Netanyahu administration is plain to see. Washington's removal of wiggle room on settlement building - with the president and his secretary of state ruling out the construction of so much as an extra housing unit even at settlements that fall firmly into the Bush letter's definition of "new realities on the ground" - stands at odds with the contention of those around the prime minister just a few days ago that the subject could be finessed and common ground re-established. In Netanyahu's circle the plaintive cry goes up that Israel has been honoring its commitments, with no land grabs and no new settlements; that the US is "unfairly depicting us as cheats and liars"; that the illegal outposts will go; and that Israel has demonstrated its willingness not merely to freeze but to uproot - from Gaza - an entire vibrant community of Jewish life. It is also argued that Netanyahu couldn't halt all settlement construction even if he tried, since some homes are being built on Jewish-purchased private land, and appeals to the Supreme Court to keep building there would be upheld. While Israel has been keeping to its road map obligations, they add, the so-called moderate leaders of the Palestinian Authority have abidingly failed to acknowledge Israel as the Jewish state to flourish alongside their sought-for Arab entity - the entire basis of the original, internationally mandated division of this land - and continue to foster incitement for Israel's demise. And far from the Palestinians implementing their phase one road map obligation to dismantle "terrorist capabilities and infrastructure," Gaza has become a full-fledged terrorist state. Interviewed by The Washington Post's Jackson Diehl last weekend, Mahmoud Abbas casually acknowledged that Ehud Olmert had shown him a map relinquishing 97 percent of the West Bank, accepted the "right of return" in principle and agreed to a limited influx to Israel of Palestinian refugees, but said that such an offer - which Diehl described as unprecedented and unlikely to be repeated - still left gaps "too wide" to bridge. Were Abbas or any subsequent Palestinian leadership to move toward positions that would enable a viable peace process, those around Netanyahu insist, this would be a gamechanger, and Netanyahu's stance would immediately become more flexible and generous. They stress, too, that Netanyahu's objections to Palestinian statehood stem from valid concerns about the threat to Israel such a fully sovereign entity would pose - concerns, they note, that are shared by the leadership of the previous Kadima-led coalition. And they note that he has made clear his commitment to all previous government agreements including the road map - full title "A performance-based roadmap to a permanent two-state solution to the Israeli-Palestinian conflict" - which they argue is tantamount to acceptance of a two-state solution. But tantamount, with this US administration, clearly won't do. AMID THE palpable dismay, those around Netanyahu nonetheless believe that even this charismatic, popular president will have to pull back a little and agree to some form of compromise on settlement building. While those around Abbas say they expect Obama to force Netanyahu from office within a couple of years, and are more than happy to wait, the prime minister's loyalists argue that he won't be so easily dislodged. He, too, is popular. And he, too, was elected on a mandate for change, after the Gaza disengagement brought the opposite of peace and after the Olmert government tried so hard to attain a two-state solution, only to be thwarted by Palestinian intransigence. But in volatile Israel, experience shows how foolish it is to bet on the medium-term, let alone long-term stability of any prime ministership. Certainly, mainstream Israel holds the Palestinians to blame for the failure of peace efforts to date. Certainly, too, mainstream Israel does not regard ongoing building within existing settlements as constituting a central factor in that failure, and is baffled, if not outraged, by Obama's disproportionate focus on the issue. Obama's speech in Cairo on Thursday, blaming Israel and the Palestinians evenly for the failure to make peace, ignoring six decades of Arab rejectionism and again highlighting that the US "does not accept the legitimacy of continued Israeli settlements," will have done nothing to change that feeling. The surprise extends beyond Israel, into neutral circles too. As Diehl was moved to observe in his Washington Post piece: "In the Obama administration, so far, it's easy being Palestinian." The Palestinians, under Bush, knew that "until they put an end to terrorism, established a democratic government and accepted the basic parameters for a settlement, the United States was not going to expect major concessions from Israel," he elaborated. But Obama, with his repeated demands for a settlement freeze, "has revived a long-dormant Palestinian fantasy: that the United States will simply force Israel to make critical concessions, whether or not its democratic government agrees, while Arabs passively watch and applaud." But mainstream Israel has also heard Netanyahu insisting that his top priorities are Iran, Iran and Iran. And Israelis may be left wondering why, even for the sake of issues as emotive and compelling as settlement and Palestinian sovereignty, the prime minister is weakening Israel's vital relationship with the United States as the existential Iranian threat looms ever closer. Saying "two states" might cause Netanyahu's coalition to wobble, but is unlikely to make it fall. Not saying "two states" is already wobbling our relationship with this administration and complicating the necessary meeting of Jerusalem and Washington minds on Iran. And incidentally, none of that, in turn, is good for Netanyahu's standing in the critical Israeli political middle ground. CERTAIN INFLUENTIAL American Jewish leaders, I am given to understand, feel strongly that Netanyahu is caught up in the wrong fight, and have urged him this week to, however reluctantly, utter those words "two state solution" - by all means adding the caveat "in principle." Others, though, are more inclined to rally behind the prime minister, and may come out with increasingly open criticism of Obama, although it will be harder for them to do so given the astute construction of the president's Cairo speech. Tellingly, at its conference just a month ago, AIPAC, the powerful pro-Israel lobby group, sent its thousands of delegates to Capitol Hill to explicitly press "for a viable Palestinian state living side-by-side, in peace, with the Jewish state of Israel." This wording, unpalatable to the prime minister, was included because it reflected AIPAC's long-term position and, quite simply, because it was essential to gaining the traditional overwhelming support for Israel from America's legislators. AIPAC not merely gently backing, but vehemently demanding a peace-process outcome for Israel that Israel's own government opposes? That's all but unthinkable, and a reflection of how out of sync Netanyahu's stance has put him even with some of those whose entire raison d'etre is to advance and safeguard Israel's interests. If AIPAC has ever been accused of taking a partisan position - a charge it has always denied - its critics have asserted that it sometimes stood to the right of center-left and left-wing Israeli governments. Here, now, it is undeniably, energetically, promoting a position to the prime minister's political left. WHILE OBAMA has been giving interviews this week, arguing that the US and Israel have a shared interest in Palestinian statehood, Netanyahu has been relatively quiet. The hope in Jerusalem, presumably, is that the president was ratcheting up the rhetoric ahead of his Cairo outreach, possibly even picking a deliberate mini-fight with Israel to bolster his even-handed peace-making credentials, and that now the dispute will simmer down to more tolerable dimensions. Administration officials on Thursday night told The Jerusalem Post gently that "a professional, constructive dialogue" was proceeding on the settlement issue, and that there was an ongoing "conversation" with Jerusalem, too, on the matter of two states. But if the US rhetoric stays at level eight, Netanyahu can be expected to mount an outreach effort of his own in the near future, to try to rally Israelis and Israel's supporters around the world, especially in the US, behind him. He may be discomfited to discover, however, that many Israelis, and many of our most committed supporters, strongly share his sense that Iran is our key danger, and therefore depart from him in his dispute with the US on the two-state terminology and on settlements, however wrongheaded they believe Obama's approach to be. Even were Netanyahu to now publicly and explicitly endorse a "two-state solution," there is no guarantee that a compromise would follow on the parameters for Jewish building in the West Bank. No guarantee whatsoever. But it would be a start. And many friends of Israel would suggest that he make it. The sorry truth is that the Palestinians are the true obstacle to peace, runs their argument, and Obama will discover this sooner or later, so why allow Israel to be mistakenly perceived as the holdout? Or, to return to the used car lot, they might say: Take the CD player and the car, and be ready to hit the road for a toughened, unified drive to halt Iran's nuclear program.