Abir Dandis, the mother of the two girls who were murdered in the Negev town of Al-Fura’a last week, couldn't find a police officer to listen to her warnings, neither in Arad nor in Ma’ale Adumim. Both police stations operate in areas where Israel wants to gather the Bedouin into permanent communities, against their will, in order to clear more land for Jewish communities. The dismissive treatment Dandis received shows how the Bedouin are considered simply to be lawbreakers by their very nature. But as a resident of the West Bank asking for help for her daughters, whose father was Israeli, Dandis faced the legal-bureaucratic maze created by the Oslo Accords.

The Palestinian police is not allowed to arrest Israeli civilians. It must hand suspects over to the Israel Police. The Palestinian police complain that in cases of Israelis suspected of committing crimes against Palestinian residents, the Israel Police tend not to investigate or prosecute them.

In addition, the town of Al-Azaria, where Dandis lives, is in Area B, under Palestinian civilian authority and Israeli security authority. According to the testimony of Palestinian residents, neither the IDF nor the Israel Police has any interest in internal Palestinian crime even though they have both the authority and the obligation to act in Area B.

The Palestinian police are limited in what it can do in Area B. Bringing in reinforcements or carrying weapons in emergency situations requires coordination with, and obtaining permission from, the IDF. If Dandis fears that the man who murdered her daughters is going to attack her as well, she has plenty of reason to fear that she will not receive appropriate, immediate police protection from either the Israelis or the Palestinians.

Dandis told Jack Khoury of Haaretz that the Ma’ale Adumim police referred her to the Palestinian Civil Affairs Coordination and Liaison Committee. Theoretically, this committee (which is subordinate to the Civil Affairs Ministry) is the logical place to go for such matters. Its parallel agency in Israel is the Civilian Liaison Committee (which is part of the Coordination and Liaison Administration - a part of the Civil Administration under the Coordinator of Government Activities in the Territories).

In their meetings, they are supposed to discuss matters such as settlers’ complaints about the high volume of the loudspeakers at mosques or Palestinians’ complaints about attacks by settlers. But the Palestinians see the Liaison Committee as a place to submit requests for permission to travel to Israel, and get the impression that its clerks do not have much power when faced with their Israeli counterparts. In any case, the coordination process is cumbersome and long.

The Palestinian police has a family welfare unit, and activists in Palestinian women’s organizations say that in recent years, its performance has improved. But, as stated, it has no authority over Israeli civilians and residents. Several non-governmental women’s groups also operate in the West Bank and in East Jerusalem, and women in similar situations approach them for help. The manager of one such organization told Haaretz that Dandis also fell victim to this confusing duplication of procedures and laws. Had Dandis approached her, she said, she would have referred her to Adalah, the Legal Center for Arab Minority Rights in Israel, which has expertise in navigating Israel’s laws and authorities.

John Kerry revealed his long-awaited plan for peace in the Middle East on Sunday, hinging on a $4bn (£2.6bn) investment in the Palestinian private sector.

The US secretary of state, speaking at the World Economic Forum on the Jordanian shores of the Dead Sea, told an audience including Israeli president Shimon Peres and Palestinian leader Mahmoud Abbas that an independent Palestinian economy is essential to achieving a sustainable peace.

Speaking under the conference banner "Breaking the Impasse", Kerry announced a plan that he promised would be "bigger, bolder and more ambitious" than anything since the Oslo accords, more than 20 years ago.

Tony Blair is to lead a group of private sector leaders in devising a plan to release the Palestinian economy from its dependence on international donors. The initial findings of Blair's taskforce, Kerry boasted, were "stunning", predicting a 50% increase in Palestinian GDP over three years, a cut of two-thirds in unemployment rates and almost double the Palestinian median wage. Currently, 40% of the Palestinian economy is supplied by donor aid.

Kerry assured Abbas that the economic plan was not a substitute for a political solution, which remains the US's "top priority".

Peres, who had taken the stage just minutes before, also issued a personal plea to his Palestinian counterpart to return to the negotiations.

"Let me say to my dear friend President Abbas," Peres said, "Should we really dance around the table? Lets sit together. You'll be surprised how much can be achieved in open, direct and organised meetings."

Thick locks hug the front gates of shuttered shops, now covered in graffiti and dust from lack of use. Only a handful of customers pass along the dimly lit road, sometimes stopping to check the ripeness of fruits and vegetables, or ordering meat in near-empty butcher shops.

“All the shops are closed. I’m the only one open. This used to be the best place,” said 64-year-old Mustafa Sunocret, selling vegetables out of a small storefront in the marketplace near his family’s home in the Muslim quarter of Jerusalem’s Old City.

Amidst the brightly coloured scarves, clothes and carpets, ceramic pottery and religious souvenirs filling the shops of Jerusalem’s historic Old City, Palestinian merchants are struggling to keep their businesses alive.

Faced with worsening health problems, Sunocret told IPS that he cannot work outside of the Old City, even as the cost of maintaining his shop, with high electricity, water and municipal tax bills to pay, weighs on him.

“I only have this shop,” he said. “There is no other work. I’m tired.”

Abed Ajloni, the owner of an antiques shop in the Old City, owes the Jerusalem municipality 250,000 Israeli shekels (68,300 U.S. dollars) in taxes. He told IPS that almost every day, the city’s tax collectors come into the Old City, accompanied by Israeli police and soldiers, to pressure people there to pay.

“It feels like they’re coming again to occupy the city, with the soldiers and police,” Ajloni, who has owned the same shop for 35 years, told IPS. “But where can I go? What can I do? All my life I was in this place.”

He added, “Does Jerusalem belong to us, or to someone else? Who’s responsible for Jerusalem? Who?”

Illegal annexation

Israel occupied East Jerusalem, including the Old City, in 1967. In July 1980, it passed a law stating that “Jerusalem, complete and united, is the capital of Israel”. But Israel’s annexation of East Jerusalem and subsequent application of Israeli laws over the entire city remain unrecognised by the international community.

Under international law, East Jerusalem is considered occupied territory – along with the West Bank, Gaza Strip and Syrian Golan Heights – and Palestinian residents of the city are protected under the Fourth Geneva Convention.

Jerusalem has historically been the economic, political and cultural centre of life for the entire Palestinian population. But after decades languishing under destructive Israeli policies meant to isolate the city from the rest of the Occupied Territories and a lack of municipal services and investment, East Jerusalem has slipped into a state of poverty and neglect.

“After some 45 years of occupation, Arab Jerusalemites suffer from political and cultural schizophrenia, simultaneously connected with and isolated from their two hinterlands: Ramallah and the West Bank to their east, West Jerusalem and Israel to the west,” the International Crisis Group recently wrote.

Israeli restrictions on planning and building, home demolitions, lack of investment in education and jobs, construction of an eight-foot-high separation barrier between and around Palestinian neighbourhoods and the creation of a permit system to enter Jerusalem have all contributed to the city’s isolation.

Formal Palestinian political groups have also been banned from the city, and between 2001-2009, Israel closed an estimated 26 organisations, including the former Palestinian Liberation Organisation headquarters in Jerusalem, the Orient House and the Jerusalem Chamber of Commerce.

Extreme poverty

Israel’s policies have also led to higher prices for basic goods and services and forced many Palestinian business owners to close shop and move to Ramallah or other Palestinian neighbourhoods on the other side of the wall. Many Palestinian Jerusalemites also prefer to do their shopping in the West Bank, or in West Jerusalem, where prices are lower.

While Palestinians constitute 39 percent of the city’s population today, almost 80 percent of East Jerusalem residents, including 85 percent of children, live below the poverty line.

“How could you develop [an] economy if you don’t control your resources? How could you develop [an] economy if you don’t have any control of your borders?” said Zakaria Odeh, director of the Civic Coalition for Palestinian Rights in Jerusalem, of “this kind of fragmentation, checkpoints, closure”.

“Without freedom of movement of goods and human beings, how could you develop an economy?” he asked.

“You can’t talk about independent economy in Jerusalem or the West Bank or in all of Palestine without a political solution. We don’t have a Palestinian economy; we have economic activities. That’s all we have,” Odeh told IPS.

Israel’s separation barrier alone, according to a new report by the United Nations Conference on Trade and Development (UNCTD), has caused a direct loss of over one billion dollars to Palestinians in Jerusalem, and continues to incur 200 million dollars per year in lost opportunities.

Israel’s severing and control over the Jerusalem-Jericho road – the historical trade route that connected Jerusalem to the rest of the West Bank and Middle East – has also contributed to the city’s economic downturn.

Separation of Jerusalem from West Bank

Before the First Intifada (Arabic for “uprising”) began in the late 1980s, East Jerusalem contributed approximately 14 to 15 percent of the gross domestic product (GDP) in the Occupied Palestinian territories (OPT). By 2000, that number had dropped to less than eight percent; in 2010, the East Jerusalem economy, compared to the rest of the OPT, was estimated at only seven percent.

“Economic separation resulted in the contraction in the relative size of the East Jerusalem economy, its detachment from the remaining OPT and the gradual redirection of East Jerusalem employment towards the Israeli labour market,” the U.N. report found.

Decades ago, Israel adopted a policy to maintain a so-called “demographic balance” in Jerusalem and attempt to limit Palestinian residents of the city to 26.5 percent or less of the total population.

To maintain this composition, Israel built numerous Jewish-Israeli settlements inside and in a ring around Jerusalem and changed the municipal boundaries to encompass Jewish neighbourhoods while excluding Palestinian ones.

It is now estimated that 90,000 Palestinians holding Jerusalem residency rights live on the other side of the separation barrier and must cross through Israeli checkpoints in order to reach Jerusalem for school, medical treatment, work, and other services.

“Israel is using all kinds of tools to push the Palestinians to leave; sometimes they are visible, and sometimes invisible tools,” explained Ziad al-Hammouri, director of the Jerusalem Centre for Social and Economic Rights (JCSER).

Al-Hammouri told IPS that at least 25 percent of the 1,000 Palestinian shops in the Old City were closed in recent years as a result of high municipal taxes and a lack of customers. “Taxation is an invisible tool…as dangerous as revoking ID cards and demolishing houses,” he said. “Israel will use this as pressure and as a tool in the future to confiscate these shops and properties.”

President Obama has reaffirmed a 4-decade-old secret understanding that has allowed Israel to keep a nuclear arsenal without opening it to international inspections, three officials familiar with the understanding said.

The officials, who spoke on the condition that they not be named because they were discussing private conversations, said Mr. Obama pledged to maintain the agreement when he first hosted Israeli Prime Minister Benjamin Netanyahu at the White House in May.

Under the understanding, the U.S. has not pressured Israel to disclose its nuclear weapons or to sign the nuclear Non-Proliferation Treaty (NPT), which could require Israel to give up its estimated several hundred nuclear bombs.

Israel had been nervous that Mr. Obama would not continue the 1969 understanding because of his strong support for nonproliferation and priority on preventing Iran from developing nuclear weapons. The U.S. and five other world powers made progress during talks with Iran in Geneva on Thursday as Iran agreed in principle to transfer some potential bomb fuel out of the country and to open a recently disclosed facility to international inspection.

Mr. Netanyahu let the news of the continued U.S.-Israeli accord slip last week in a remark that attracted little notice. He was asked by Israel's Channel 2 whether he was worried that Mr. Obama's speech at the U.N. General Assembly, calling for a world without nuclear weapons, would apply to Israel.

"It was utterly clear from the context of the speech that he was speaking about North Korea and Iran," the Israeli leader said. "But I want to remind you that in my first meeting with President Obama in Washington I received from him, and I asked to receive from him, an itemized list of the strategic understandings that have existed for many years between Israel and the United States on that issue. It was not for naught that I requested, and it was not for naught that I received [that document]."

The chief nuclear understanding was reached at a summit between President Nixon and Israeli Prime Minister Golda Meir that began on Sept. 25, 1969. Avner Cohen, author of "Israel and the Bomb" and the leading authority outside the Israeli government on the history of Israel's nuclear program, said the accord amounts to "the United States passively accepting Israel's nuclear weapons status as long as Israel does not unveil publicly its capability or test a weapon."

There is no formal record of the agreement nor have Israeli nor American governments ever publicly acknowledged it. In 2007, however, the Nixon library declassified a July 19, 1969, memo from national security adviser Henry Kissinger that comes closest to articulating U.S. policy on the issue. That memo says, "While we might ideally like to halt actual Israeli possession, what we really want at a minimum may be just to keep Israeli possession from becoming an established international fact."

Mr. Cohen has said the resulting policy was the equivalent of "don't ask, don't tell."

The Netanyahu government sought to reaffirm the understanding in part out of concern that Iran would seek Israeli disclosures of its nuclear program in negotiations with the United States and other world powers. Iran has frequently accused the U.S. of having a double standard by not objecting to Israel's arsenal.

Mr. Cohen said the reaffirmation and the fact that Mr. Netanyahu sought and received a written record of the deal suggest that "it appears not only that there was no joint understanding of what had been agreed in September 1969 but it is also apparent that even the notes of the two leaders may no longer exist. It means that Netanyahu wanted to have something in writing that implies that understanding. It also affirms the view that the United States is in fact a partner in Israel's policy of nuclear opacity."

Jonathan Peled, a spokesman for the Israeli Embassy in Washington, declined to comment, as did the White House National Security Council.

The secret understanding could undermine the Obama administration's goal of a world without nuclear weapons. In particular, it could impinge on U.S. efforts to bring into force the Comprehensive Test Ban Treaty and the Fissile Material Cutoff Treaty, two agreements that U.S. administrations have argued should apply to Israel in the past. They would ban nuclear tests and the production of material for weapons.

A Senate staffer familiar with the May reaffirmation, who asked not to be named because of the sensitivity of the issue, said, "What this means is that the president gave commitments that politically he had no choice but to give regarding Israel's nuclear program. However, it calls into question virtually every part of the president's nonproliferation agenda.The president gave Israel an NPT treaty get out of jail free card."

Daryl Kimball, executive director of the Arms Control Association, said the step was less injurious to U.S. policy.

"I think it is par for the course that the two incoming leaders of the United States and Israel would want to clarify previous understandings between their governments on this issue," he said.

However Mr. Kimball added, "I would respectfully disagree with Mr. Netanyahu. President Obama's speech and U.N. Security Council Resolution 1887 apply to all countries irrespective of secret understandings between the U.S. and Israel. A world without nuclear weapons is consistent with Israel's stated goal of achieving a Middle East free of weapons of mass destruction. Obama's message is that the same nonproliferation and disarmament responsibilities should apply to all states and not just a few."

Israeli nuclear doctrine is known as "the long corridor." Under it, Israel would begin to consider nuclear disarmament only after all countries officially at war with it signed peace treaties and all neighboring countries relinquished not only nuclear programs but also chemical and biological arsenals. Israel sees nuclear weapons as an existential guarantee in a hostile environment.

David Albright, president of the Institute for Science and International Security, said he hoped the Obama administration did not concede too much to Israel.

"One hopes that the price for such concessions is Israeli agreement to the Comprehensive Test Ban Treaty and the Fissile Material Cutoff Treaty and an acceptance of the long-term goal of a Middle East weapons-of-mass-destruction-free zone," he said. "Otherwise, the Obama administration paid too much, given its focus on a world free of nuclear weapons."

Ahead of the Obama administration's first U.S.-Palestinian-Israeli summit, Israel has agreed to a partial freeze of settlement construction for six to nine months but still wants to build more than 2,500 new housing units, said Israeli officials and an Israeli specialist familiar with the country's evolving policy.

The private Israeli position, which was described by these three individuals on the condition that they not be named, is at odds with the public stance Prime Minister Benjamin Netanyahu has taken before the meeting Tuesday with President Obama and Palestinian leader Mahmoud Abbas in New York. The prime minister's media adviser, Nir Hefetz, told Israeli radio Monday that Mr. Netanyahu would not support a settlement freeze, because he considers the settlements to be a "Zionist enterprise."

The issue of settlements has roiled U.S.-Israel relations. President Obama is demanding that Israel suspend construction on the West Bank and in East Jerusalem as part of a plan to restart negotiations and encourage Arab states to begin the process of recognizing the Jewish state.

What the Israelis are offering is still shy of Mr. Obama's demands. The two Israeli officials and the Israel specialist said Mr. Netanyahu wants to move forward with 2,500 to 3,000 housing units already approved and to exempt East Jerusalem, which the Palestinians foresee as a future capital, from the freeze. The U.S. also sought a yearlong freeze, while Mr. Netanyahu is offering six to nine months, the Israelis said.

Given the gaps, Israeli and American officials have downplayed expectations for the summit at the Waldorf-Astoria hotel and have said they do not expect any agreement to be announced.

Mr. Obama will meet first with Mr. Netanyahu, then with Mr. Abbas and then all three together.

Former Senate Majority Leader George Mitchell, Mr. Obama's envoy on the Arab-Israeli conflict, has been shuttling for months to try to choreograph simultaneous concessions by both sides.

A U.S. official, speaking on the condition that he not be named because the negotiations are continuing, said Mr. Mitchell has received private assurances from some Gulf Arab and North African states to grant over-flight rights to Israeli jets, open interest sections in Israel and end a travel ban against Israelis if Israel freezes settlement construction. Saudi Arabia, guardian of Islam's holiest sites, has not agreed to these steps absent a peace agreement.

"Thus far, the Arabs have stiffed Obama and the Israelis in their own exquisite way are stiffing him," said Aaron David Miller, a former senior Middle East adviser to six U.S. secretaries of state. "He is not getting a comprehensive settlement freeze. In fact, over the next 18 months, it may look like a construction boom; 2,500 to 3,000 new units is a lot of construction and to boot the Israelis will never agree to anything on Jerusalem."

Israeli officials Tuesday accused the Obama administration of failing to abide by an agreement allowing settlement construction, but a key Israeli negotiator said the deal was never implemented.

The unfinished negotiation between the administrations of Israeli Prime Minister Ariel Sharon and President George W. Bush has contributed to rising tensions between the two allies since the Obama administration took office.

The U.S. insists that Israel freeze settlement construction to improve the prospects for Israeli-Palestinian negotiations. Israeli officials have claimed that a 2003 understanding with the Bush administration permitted "natural growth" within settlements expected to remain under Israeli control even if a Palestinian state is created.

"We never had an agreement with the previous administration. We had an agreement with America," Dan Meridor, an Israeli deputy prime minister, told reporters in Jerusalem on Tuesday. "The agreement we had with America is binding on us and them."

However, Dov Weissglas, who was chief of staff to Mr. Sharon and lead Israeli negotiator at the time, told The Washington Times that the agreement was not implemented because the two sides never specified where within existing settlements new construction would be permitted.

Under the deal, Israel was to stop confiscating Palestinian land for settlement construction, refrain from building new settlements and end tax subsidies for settlement construction and for Israelis who moved to these areas in formerly Arab-controlled territory.

Israel was to be allowed to add housing within a "construction line," but work to demarcate that "construction line" was never completed, Mr. Weissglas said.

"The agreed principle was there would be no construction beyond the construction line, then months later, we, meaning Israel and the United States, realized that it is quite difficult to resolve it, to define where is the construction line in certain instances," Mr. Weissglas said.

U.S.-Israeli teams were to survey the settlements. The Israelis wanted first to survey settlements east of a security barrier Israel has built in the West Bank. These settlements are the most likely to be relinquished by Israel under a peace agreement.

Mr. Weissglas said that the U.S. government wanted to start in the west, with housing likely to remain within Israel under a peace deal.

The dispute has dominated U.S.-Israeli relations in recent months, causing strains not seen since President George H.W. Bush withheld $10 billion in U.S. loan guarantees to the Jewish state.

"Israel never expected to have such pressure put on it publicly" over the settlements, said Stephen P. Cohen, president of the Institute for Middle East Peace and Development and a veteran proponent of Arab-Israeli peace.

State Department spokesman Robert Wood on Tuesday reiterated U.S. policy but said it was "premature to talk about" financial penalties against Israel for continuing to build settlements.

"I think we've been very clear with regard to settlements," Mr. Wood said. "They need to stop, and that includes natural growth. ... The Israelis are well aware of our position."

Mr. Weissglas said that by 2005, with Mr. Sharon preoccupied by Israel's unilateral withdrawal from Gaza, the U.S. and Israel dropped plans to demarcate the construction line in the West Bank.

"There was an agreement," Mr. Weissglas said. "The implementation of the agreement was not concluded because both parties to a certain degree willingly neglected the conclusion of the demarcation process."

The understanding was never drawn up as a formal agreement.

Elliott Abrams, a deputy national security adviser for President George W. Bush who negotiated the deal on the U.S. side, said that was not unusual.

"There were lots of agreements between the U.S. and Israel because there was tremendous trust between the two governments," he said. "We did not operate in a context in which anything that was not written down would disappear; we operated in a context of trust and confidence."

Some critics of Israeli settlement policy acknowledge that the 2003 understanding curbed some activities.

Ori Nir, a spokesman for Americans for Peace Now, said, "While there was an improvement in recent years in terms of a reduction of government approval of new settlements, the scope of West Bank land expropriation and subsidies for settlers, this progress was dwarfed by the enormous boom in new tenders for construction in existing settlements, with little attention paid to the built-up 'footprint' of settlements."

Aaron Miller, a former senior adviser to six secretaries of state on Arab-Israeli peace, said the Obama administration's pressure on Israel over the issue is greater than in nearly two decades.

"The Obama administration has chosen to ignore the debate as to whether the 'Bush 43' understandings on settlements were formal or informal," he said. "They have simply decided to push ahead with their own view of what they want from the Israelis with respect to a settlements freeze."

Mr. Miller said the Obama administration had gone further than the administration of George H.W. Bush "in demanding a total settlement freeze." While the U.S. has not threatened economic penalties, Mr. Miller said, "it is fair to say not since 'Bush 41' and [Secretary of State James] Baker has any administration given settlement activity such a central role in its strategy towards the Arab- Israeli peace process."

Mr. Obama's special envoy for Arab-Israeli peace, George Mitchell, is working behind the scenes on the issue, said two Israeli officials who spoke on the condition that they not be named because of the sensitivity of the dispute.

The officials said Mr. Mitchell is working on a compromise that would require Israel to freeze settlement construction for three to six months. Mr. Mitchell is due in Israel next week.

Hussein Ibish, a senior fellow at the American Task Force on Palestine, said the 2003 understandings did yield "measurable progress" in curbing some settlement activity.

However, Mr. Ibish said that the understandings were the product of "conflict management," which he contrasted with Mr. Obama's desire to resolve the dispute.

"The Obama administration seems determined to move beyond conflict management towards conflict resolution with an eye to the actual creation of the Palestinian state," he said. "That means that any significant settlement activity is a major obstacle to U.S. policy goals. Even if the people involved in the 2003 to 2005 conversations feel there was an agreement, it no longer has any relevance to the foreign policy approach of the current administration and is therefore moot."

Israeli Prime Minister Benjamin Netanyahu, in a major shift, will accept the notion of a Palestinian state -- a policy pushed by the Obama administration but resisted until now by Mr. Netanyahu, Israeli officials and Americans briefed on the Israeli leader's thinking said.

The policy reversal, which is expected to go public this weekend, could help restart negotiations between Israel and the Palestinians and allow the Israeli leader to steer a course between Mr. Obama's view and those of his own hawkish base.

The Israeli and American officials, who spoke on the condition of anonymity, told The Washington Times on Thursday that Mr. Netanyahu, in a major speech Sunday, will, however, set Israeli parameters for recognizing Palestinian sovereignty.

The officials said Mr. Netanyahu will emphasize Palestinian obligations under the "road map" to peace in the Middle East -- a three-phase process for negotiations initiated by the George W. Bush administration, which so far has not been followed.

Any discussion of a two-state solution and negotiations on so-called final-status issues -- including the borders of a future Palestinian state would represent a major modification of Mr. Netanyahu's campaign platform in which he promised a "bottom up" approach to negotiations focusing on economic issues.

The conditions he is expected to put forward include:

• Any Palestinian state must be demilitarized, without an air force, full-fledged army or heavy weapons.

• Palestinians may not sign treaties with powers hostile to Israel.

• A Palestinian state must allow Israeli civilian and military aircraft unfettered access to Palestinian airspace, allow Israel to retain control of the airwaves and to station Israeli troops on a future state's eastern and southern borders.

• Palestinians must accept Israel as a Jewish state, a nod to the hawkish side of Mr. Netanyahu's governing coalition that has raised concerns that the Palestinian Authority, which nominally governs the West Bank, does not recognize Israel as a Jewish state.

The State Department declined to comment on the details of what Mr. Netanyahu is expected to say.

While both Mr. Netanyahu and President Obama have emphasized the need for the wider Arab world to support negotiations by recognizing Israel, the two leaders have clashed over Jewish settlements in the West Bank. Mr. Netanyahu has asserted Israel's right to expand settlements to account for "natural growth," meaning the children of nearly a half-million Israeli settlers in the West Bank and East Jerusalem.

Mr. Obama and Secretary of State Hillary Rodham Clinton have rejected any further settlement construction.

Mr. Obama's special envoy for Arab-Israeli negotiations, former Senate Majority Leader George Mitchell, was in Jerusalem this week to discuss the idea of swapping West Bank land for territory in Israel to allow some settlements to remain within Israel's final borders, according to the BBC.

"Among the elements one would expect in the speech would be an emphasis on a demilitarized state; there should be no treaties with hostile states; and it must have open airspace and Israeli control of the electromagnetic spectrum," said an Israeli official who asked not to be named because the speech was still being refined.

Mr. Netanyahu this week began a series of consultations with his political coalition in the run-up to the speech to be given at Bar-Ilan University between Jerusalem and Tel Aviv. He met with members of his center-right Likud Party in his office Wednesday to explain the speech and told them: "There are considerations you arent aware of."

Aaron Miller, a former Arab-Israeli negotiator for Republican and Democratic administrations, said a Netanyahu endorsement of a two-state solution with conditions is "meant to cover Netanyahu politically as he obviously endorses Palestinian statehood through the back door."

As for the specific caveats attached to creation of a Palestinian state, Mr. Miller said, the same issues were discussed at length in 2000 at Camp David in the last serious round of U.S.-brokered final status negotiations between Palestinian leader Yasser Arafat and Prime Minister Ehud Barak, who is defense minister in the Netanyahu government.

"There were hours of discussion of demilitarization around all of these issues," said Mr. Miller, who was present in most of the meetings at Camp David. "There were no formal conditions advanced or codified. There is no question that Ehud Barak's needs and requirements on security would relate to a new conception of Palestinian sovereignty around demilitarization. The Israelis also had requirements on the Jordan Valley [but] none of this advanced to the level of what you could even call understandings. These were discussions."

Hussein Ibish, a senior fellow at the American Task Force on Palestine, said he thought it was reasonable to expect Palestinian negotiators to agree to a demilitarized state that did not enter into agreements with countries hostile to Israel.

But Mr. Ibish said that the Israeli conditions regarding airspace and the airwaves should be viewed as a starting point.

"The question of airspace and the electromagnetic spectrum is probably something that will require much more negotiations," Mr. Ibish said. "The idea that the Palestinian state will not have sovereignty over these aspects of national life is one thing, saying that there will be accommodations for Israeli security concerns something else altogether."

Malcolm Hoenlein, executive vice chairman of the Conference of Presidents of Major American Jewish Organizations, said he expected the Israeli prime minister to reject what Palestinians call a right of return, a demand that the Palestinians displaced by the founding of Israel in 1948 have claims to territory inside the pre-1967 borders of Israel.

"I think he will say no right of return and reassert the unity of Jerusalem. It will be consistent with past understandings and that they see the road map as the basis of further action," Mr. Hoenlein said.

Hagit Ofran, the head of the Settlement Watch Project for Israeli Peace Now, said that the first phase of the road map required Israel to freeze settlements, and the original deadline in May 2003 for Israel to do that was one week.

"We have been in the first week of the road map for six years now," she told editors and reporters of The Times earlier this week.

She added that settlement activity has continued unabated since the 1993 Oslo accords between Israel and Mr. Arafat's Palestine Liberation Organization but that she thinks Mr. Netanyahu could survive in office even if he halts settlement growth.

She also said that if she were Mr. Obama, she would prefer a different government like the current one in Israel.

"I want to clarify the issue for Israel. Do we want to continue to build settlements, or do we want peace?" she asked. "We have heard Israeli leaders say they are against settlements but they were still built. If this is what Israel is saying, let it sing."