JERUSALEM -- Israel rejected on Thursday a U.S. demand to freeze all construction in West Bank Jewish settlements to encourage peace talks, deepening a dispute with the Obama administration that has the hard-line Israeli government increasingly on edge.
The tensions flared on the same day Palestinian President Mahmoud Abbas was in Washington for a meeting with President Obama. Abbas said the Palestinian demand for a settlement construction freeze would top his agenda.
Using unusually strong language, U.S. Secretary of State Hillary Rodham Clinton said Wednesday that Obama wants a halt to all settlement construction, including "natural growth." Israel uses that term for new housing and other construction that it says will accommodate the growth of families living in existing settlements.
Government spokesman Mark Regev responded Thursday by saying some construction would go on.
"Normal life in those communities must be allowed to continue," he said, noting Israel has already agreed not to build new settlements and to remove some tiny, unauthorized settler outposts. Regev said the fate of the settlements would be determined in peace negotiations with the Palestinians.
Former President George W. Bush gave Israel unwavering support during his eight-year term. But that appears to be changing under Obama.
The new U.S. administration has been more explicit in its criticism of Israeli settlement policy than its predecessor. Obama also pressed Prime Minister Benjamin Netanyahu in their first White House meeting last week to support creation of a Palestinian state alongside Israel. But so far, Netanyahu has balked at that idea, too.
The growing pressure, coupled with Obama's outreach to the Muslim world that will be underscored by a speech in Cairo next week, has many Israelis wondering where exactly they fit into the president's plans. They are particularly concerned by Washington's efforts to start a dialogue with Iran, Israel's archfoe, after nearly three decades of diplomatic estrangement.
Clinton said Obama told Netanyahu last week at the White House that the U.S. sees stopping settlements as key to a peace deal that would see a Palestinian state created alongside Israel.
"He wants to see a stop to settlements -- not some settlements, not outposts, not 'natural growth' exceptions," Clinton said. "We think it is in the best interests [of the peace process] that settlement expansion cease. That is our position. That is what we have communicated very clearly. ... And we intend to press that point."
While Israel could flout the U.S. opposition, Netanyahu is wary of a showdown with his most important ally. He has been careful to avoid direct conflict with the Americans, but members of his government have become openly critical.
Israel views its close relationship with the U.S. as fundamental to its security and foreign policy. If Israel refused to halt settlement construction, the U.S. could reduce economic or military aid, curtail arms sales, or scale back the close strategic cooperation the two countries currently have, including the sharing of information and joint projects, such as anti-missile systems.
During a Cabinet debate on settlement outposts this week, Interior Minister Eli Yishai declared that Israel does not have to "kowtow to every American dictate."
"The American administration regrettably ... is showing the Arab and Muslim world that it is distancing itself from Israel and shifting toward them," Cabinet Minister Benny Begin lamented during a separate parliamentary debate. "The message is clear. The will is clear."
The U.S. and much of the world consider the settlements an obstacle to peace because they are built on captured land the Palestinians claim for a future state. But successive U.S. administrations have done little to halt settlement activity.
Now more than 120 settlements dot the West Bank, and Palestinian officials say their growth makes it increasingly impossible to realize their dream of independence. More than 280,000 Israelis live in the settlements, in addition to more than 2 million Palestinians in the West Bank. An additional 180,000 Israelis live in east Jerusalem, where the Palestinians hope to establish their capital.
With the U.S. turning up the pressure to freeze settlements, Israeli officials proposed a compromise earlier this week. In exchange for removing some 22 outposts, they would ask the U.S. to permit new construction in existing settlements. Clinton's remarks followed that proposal.
Along with the calls to halt settlements, Obama's active courting of Iran and pressure on Israel to make progress with the Palestinians have only compounded Israeli fears.
Israelis will be anxiously watching Obama's June 4 speech in Cairo, where he will deliver a message to the Muslim world to try to repair relations that frayed badly under the Bush administration.
Obama will also visit Saudi Arabia before he goes to Egypt. But he has no plans to stop in Israel, an hour's flight from Egypt, during his swing through the region.
The U.S. and many other Western countries have been dealing with Abbas, who leads the Palestinian Authority from the West Bank, while mostly shunning the militant Islamic Hamas group that controls the Gaza Strip.
Hamas took over Gaza nearly two years ago after routing Abbas' forces in bloody street battles. Repeated attempts to reconcile between the two bitter rivals have failed to yield any results.
A senior Hamas militant was killed Thursday by Israeli forces in the West Bank city of Hebron after a 14-year manhunt.
The Israeli military said they surrounded Abed Majid Daodin's house and called on him to surrender, but he instead opened fire, and they shot and killed him.
The military said he had recruited and dispatched suicide bombers, including two who killed 10 Israelis and wounded more than 100 in 1995.
Hamas vowed to avenge the militant's death. "Our fighters in the West Bank have full freedom to strike any target," the group said.