Listen to the story.
MARCO WERMAN: I'm Marco Werman and this is The World, a co-production of the BBC World Service, PRI and WGBH Boston. The U.S. and Israel continue to be at odds over housing in Jerusalem. Tensions surfaced a couple of weeks ago when Israel announced plans to build 1,600 new homes in East Jerusalem. Relations are still tense now that Israeli Prime Minister Benjamin Netanyahu is in Washington, yet both U.S. and Israeli officials say they want to move on. The Israeli Prime Minister got an all smiles welcome from both Democrats and Republicans on Capital Hill today. But as The World's Matthew Bell reports, that doesn't mean the disagreements with the White House have suddenly evaporated.
MATTHEW BELL: The American Israel Public Affairs Committee, or AIPAC as its known, is one of the most powerful lobby groups in Washington. Prime Minister Netanyahu's speech last night was the main event at the group's annual policy conference. And to say he got the rock star treatment would be an understatement. But the loudest applause came when Netanyahu delivered this line. It seemed to be a direct response to the Obama administration's call for limits on Israeli building projects in East Jerusalem.
PRIME MINISTER BENJAMIN NETANYAHU: The Jewish people were building Jerusalem 3,000 years ago and the Jewish people are building Jerusalem today. Jerusalem is not a settlement, its our capital.
BELL: Earlier in the day Secretary of State Hillary Clinton told the same crowd that Israeli expansion on lands it captured in the 1967 war hurts U.S. backed efforts to revive peace talks between Israel and the Palestinians.
SECRETARY OF STATE HILLARY CLINTON: It undermines America's unique ability to play a role, an essential role, in the peace process. Our credibility in this process depends in part on our willingness to praise both sides when they are courageous, and when we don't agree to say so and say so unequivocally.
BELL: But Netanyahu had a response for that as well. He said his government has done its part to get back to negotiations with the Palestinians. It has lifted roadblocks in the West Bank and agreed to a temporary freeze on settlement construction there. Netanyahu has also said he would recognize a Palestinian state if it is demilitarized and if the Palestinians recognize Israel as the legitimate home of the Jewish people. What have the Palestinians done, Netanyahu asked? And then he answered his own question.
NETANYAHU: They placed preconditions on peace talks, waged a relentless international campaign to undermine Israel's legitimacy and promoted the notorious Goldstone Report that falsely accuses Israel of war crimes.
NATHAN BROWN: Anybody listening to Netanyahu's speech by itself would say that the Israeli position is strong, uncompromising, and almost pugnacious.
BELL: But Nathan Brown, Middle East expert at the Wilson Center says there is a difference between the rhetoric and the reality.
BROWN: The real question is what's happening on the ground? And it is consistent with Netanyahu's record to strike a fairly bold public pose, but at the same time try, at least, to find a short term way of managing relations with the United States.
BELL: So, Brown wonders, might Netanyahu be willing to halt construction in East Jerusalem even if he's unwilling to talk about it in public. That could be exactly what's going on here says Robert Satloff of the Washington Institute for Near East Policy.
ROBERT SATLOFF: You know, that difference between principal and execution is where the two sides may find a band aid to repair this current crisis. It doesn't affect the fundamentals, but it will get them through the current crisis.
BELL: Many analysts believe the current rift between the U.S. administration and the Netanyahu government is not as bad as they headlines would suggest. Daniel Levy is a Middle East expert with the New America Foundation. He says some language Netanyahu used last night could be very telling.
DANIEL LEVY: You also had a hint, and I don't want to call it more than that, but a hint in Prime Minister Netanyahu's speech, when he said that we know the Jewish neighborhoods are going to be part of any peace deal, he didn't say what I'd like to hear, which is, and that he Palestinian neighborhoods in Jerusalem will be part of the Palestinian state. But he didn't say the opposite either. By just referring to the Jewish neighborhood, he may have been starting to signal seriousness. We're not there yet, but that language could signal seriousness.
BELL: Another fundamental question in all this is whether the Palestinians are willing to restart negotiations. Palestinian President Mahmud Abbas risks losing what little political capital he still has in the Palestinian territories if he agrees to go back to the bargaining table after months of saying no to talks without a complete building freeze in the West Bank and East Jerusalem. For The World, I'm Matthew Bell, Washington.