An Unsettled Question Recalibrating U.S. Policy on Israeli Settlements

Key Findings:

Israeli policy in the West Bank has been a historical point of tension in the U.S.-Israel relationship. U.S. policy has consistently opposed Israeli settlement expansion, and views it as illegal and a barrier to peace. The settlement enterprise has thrived under successive Israeli governments and continued during all U.S. administrations, and is now a major obstacle to conflict resolution. The United States faces both a responsibility and an opportunity to recalibrate its approach to Israeli settlements in the West Bank. 

Three major threats posed by Israel’s current government to the viability of a two-state solution and regional stability demand urgent American attention:

(1) Accelerated de facto annexation: Israel is increasingly consolidating control over the West Bank through settlement expansion, land appropriation, and the legalization of outposts. This has been accompanied by demolitions and the displacement of Palestinian communities. These actions undermine prospects for territorial separation and peace.

(2) Creeping de jure annexation: Israel’s legal and administrative adjustments are blurring the lines between temporary military control and permanent civilian rule in the West Bank. Such changes are entrenching Israeli control and eroding the possibility of a negotiated two-state solution.

(3) Formal de jure annexation: Although less likely, formal annexation of large parts of the West Bank remains a threat. Such an action would likely collapse the Palestinian Authority, trigger regional instability, and eliminate any remaining prospects for a two-state agreement.

The proposed U.S. policy adjustments on Israeli settlements center on two main elements. The first aims to realign U.S. policy in unequivocal support of a two-state solution by underscoring how Israeli settlements obstruct its realization. The second calls for a differentiated U.S. approach to settlements, focusing on their specific impacts on a future diplomatic resolution, rather than treating all settlements as equally problematic.

Proposal 1: Re-orienting U.S. Policy in Support of Two States

(1) Adjusting and Clarifying U.S. Positions:

-Reinforce U.S. commitment to a two-state solution, acknowledging both Israelis' and Palestinians' attachment to the land.

-Establish clear parameters for a two-state outcome based on the 1967 borders with mutually agreed land swaps, while reiterating that settlements violate international law until a final-status agreement is reached.

-Emphasize opposition to settlements as a longstanding U.S. bipartisan policy and reassert their illegality and non-recognition of annexation.

(2) Improving U.S. Multilateral Approaches:

-Codify opposition to Israeli annexation in regional normalization agreements and ensure Palestinian concerns are incorporated.

-Clarify that U.S. defense of Israeli settlement policies in international fora is not automatic.

(3) Bilateral U.S.-Israel Engagement:

-Increase public diplomacy efforts against settlement activities, apply pressure in tandem with negotiations, and promote Palestinian development in Area C.

-Develop economic incentives for Israel to halt settlement activities, such as preferential trade terms, and support compensation programs for settlers in certain areas.

(4) Improving U.S. Understanding:

-Enhance U.S. officials’ understanding of the geographic and ideological context of settlements through education and increased monitoring efforts.

Proposal 2: U.S.-Israeli Agreement on Partial Settlement Freeze with a Differentiated Approach 

This proposal advocates for a partial settlement freeze through a bilateral U.S.-Israel agreement that differentiates between settlement activities. Settlements that significantly hinder a two-state outcome would face stricter measures, while others, which do not critically affect territorial separation, would be treated differently. The U.S. should focus on three principles in this approach:

(1) Recognition of Certain Areas for Israel in Future Agreements:

-Settlement construction would be limited to areas that are likely to remain part of Israel in any final-status resolution, based on past negotiations and land swaps.

(2) Maintaining Negotiating Space:

-The freeze should cover areas highly detrimental to a two-state outcome, such as settlements in sensitive parts of East Jerusalem, while excluding less intrusive areas.

(3) Commitment to a Two-State Outcome:

-A full freeze on settlement construction east of the separation barrier, where Israel would renounce sovereignty claims, and offer compensation to settlers in these areas.

If a bilateral agreement cannot be achieved, the U.S. should adopt a unilateral differentiated policy toward settlements. This would involve varying levels of opposition to settlement activities based on their impact on a two-state solution, without granting approval to any settlements. In both bilateral and unilateral approaches, the U.S. would prioritize a two-state outcome and take more decisive actions against settlement activities that pose the greatest threat to its realization, breaking from the longstanding dynamic where Israeli governments have held an advantage despite U.S. objections.