Israeli Prime Minister Benjamin Netanyahu and President Obama at the White House (White House photo)

TEL AVIV – The Obama administration wants to abrogate a secret deal that President Bush made to allow Israel to construct homes in previously existing West Bank Jewish communities, WND has learned.

"The matter is ongoing and is subject to current talks with the U.S. administration," said a source in Prime Minister Benjamin Netanyahu's office.

The source was referring to a 2005 deal Bush made with then-Prime Minister Ariel Sharon that Israel can continue "natural growth" of West Bank settlements, meaning adding housing to current communities in that territory to account for growth in population.

The deal was forged just prior to Israel's 2005 retreat from the Gaza Strip. It was confirmed by Sharon aide Dov Weissglas in 2005, and again last week in statements to the Washington Post by Elliott Abrams, a former deputy national security adviser to Bush who reportedly negotiated the arrangement. The deal was in line with an official letter from Bush the year before stating Israel cannot be expected to withdraw from the entire West Bank and that the Jewish state would retain major settlement blocs there.

The Obama administration, however, has made clear it wants to see Israel stop all construction in the West Bank, including natural growth.

Last week, Secretary of State Hillary Clinton told Al Jazeera: "We want to see a stop to settlement construction, additions, natural growth – any kind of settlement activity. That is what the president has called for."

But Netanyahu has rejected that position.

"We won't build new settlements, but people who live in settlements should be allowed to live normally, including natural growth," Netanyahu's spokesman, Mark Regev, told WND today.

In a Knesset meeting today, Netanyahu was quoted stating: "We do not intend to build any new settlements, but it wouldn't be fair to ban construction to meet the needs of natural growth or for there to be an outright construction ban."

'We won't let U.S. threaten us'

Strategic Affairs Minister Moshe Ya'alon, Israel's vice premier, lashed out at the U.S. position against natural growth, saying the Palestinian and greater Arab rejection of Israel is not due to settlements but because of Israel's existence.

"Settlements are not the reason that the peace process is failing; they were never an obstacle, not at any stage," said Ya'alon. "Even when Israel pulled out of [Palestinian] territory, the terror continued. Even when we uprooted [Jewish] communities, we got 'Hamastan.' That is why I propose that we think about it – not in slogans and not with decrees."

Ya'alon stated, "We will not halt the construction in the settlements within the framework of natural growth. There are people here who are living their lives, raising children. Housing is required. It wasn't housing that has prevented peace."

Ya'alon also had harsh words for the White House:

"[U.S. envoy to the Middle East George] Mitchell will come, and we'll talk to him. I suggest that Israel and not the U.S. set a timetable. We won't let them threaten us," Ya'alon said.

"From the banks of the Potomac in Washington it is not always clear what the real situation here is," Ya'alon concluded. "This is where Israel must step in and help her ally understand the situation."

Obama works to tie Israel's hands

While Obama reportedly is looking to get out of a deal agreed to by his predecessor, the U.S. president seems to expect Netanyahu to stand by extreme concessions to the Palestinians under his predecessor, Ehud Olmert.

According to sources in Netanyahu's camp, President Obama communicated in his meeting with Netanyahu last week that he expects Israeli talks with the Palestinians to begin where negotiations were left off during talks led by Olmert.

According to multiple reports, Olmert offered the Palestinians a state in much of the West Bank and peripheral sections of eastern Jerusalem.

Following his meeting with Netanyahu, Obama said he had told the new Israeli leader during more than two-hours of talks that his government must move quickly to resume peace negotiations with the Palestinians.

In an instructive announcement, Obama said he had insisted negotiations start from a previous point negotiated on the establishment of a Palestinian state.

"We have seen progress stalled on this front, and I suggested to the prime minister that he has a historic opportunity to get a serious movement on this issue during his tenure," Obama said.

"That means that all the parties involved have to take seriously obligations that they have previously agreed to," he said.

WND broke the story in November that Secretary of State Condoleezza Rice had collected notes and documents from Israeli and Palestinian negotiating teams to ensure Obama's incoming administration will not need to assist in negotiations from scratch.

Rice's State Department assembled the notes concerning issues on which both sides are close to an agreement, according to informed Israeli and Palestinian sources who spoke to WND in November.

WND reported at the time Rice's move could limit the incoming Israeli prime minister, since the Palestinian Authority can point to notes documenting points of agreement by Olmert.

While Olmert's non-finalized decisions during negotiations are not binding for the next prime minister, documents noting agreements during previous Israeli-Palestinian negotiations have been used at times as starting points in subsequent talks.

According to both Israeli and PA sources, American officials took detailed notes of talks at U.S.-brokered negotiations at Camp David in 2000 and then used points of agreement on key issues, such as borders, during the current round of intense Israeli-Palestinian talks, which continue this week.

Informed Israeli and Palestinian sources told WND that under Olmert Israel and the PA were quietly working to conclude a major agreement seeking an eventual major West Bank withdrawal and the granting of permission to the PA to open official institutions in Jerusalem. The agreement would have postponed talks on the future status of the capital city until new Israeli and U.S. governments were installed in 2009.

Just before he departed his post, Olmert gave a major interview to Israel's Yediot Aharonot newspaper in which he revealed he had offered the Palestinians a state in about 94 percent of the West Bank and that he had been negotiating the handover or sections of Jerusalem.

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