Q. What's the significance of Netanyahu's loud rejection of US pressures regarding new housing construction for Jews in East Jerusalem?

A. It would appear to constitute an escalation of the confrontation over settlements.

The Obama administration protested last week to Israel's new ambassador in Washington, Michael Oren, against Jerusalem municipality permission to build 20 housing units for Jews on the site of the old Shepherd Hotel in the Sheikh Jarrah neighborhood of East Jerusalem. The UK, whose consulate is near the site, also protested to Israel. American officials clarified that the US views construction of neighborhoods for Jews in the Arab areas of East Jerusalem the same way it views outpost construction in the West Bank, and opposes both. Israeli Defense Minister Ehud Barak has been negotiating the issue of settlement construction with US emissary George Mitchell, thus far without a meeting of the minds.

Prime Minister Binyamin Netanyahu rejected the American protests very publicly at the Sunday morning Cabinet meeting, stating that Jerusalem is Israel's capital and not a settlement. It appeared that Netanyahu felt very comfortable raising the issue, on the assumption that Israeli and even American Jewish support for united Jerusalem as the capital of Israel is far greater than regarding settlements. In effect, by diverting the settlement construction issue to Jerusalem Netanyahu, thanks to the American protest, hopes to rally Israeli and Diaspora opinion behind him and against Obama administration pressures.

Nevertheless, and significantly, Netanyahu and his advisors felt a need to anchor his protest in "facts". And the facts put them on shaky ground. For example, the prime minister claimed that anyone, Jew or Arab, could purchase a dwelling anywhere in Jerusalem, and pointed to a few dozen Arab residents in Jewish neighborhoods like French Hill and Pisgat Zeev.

But these neighborhoods are in East Jerusalem, annexed by Israel in 1967. That's what the controversy over Jerusalem is all about. Arabs who moved there did so due to the housing shortage in East Jerusalem brought on by two factors. One is construction of the Jerusalem security barrier, which separates East Jerusalem from the West Bank and makes it extremely difficult for Arabs to live outside the city and commute to work there. The second factor is the failure over the past 42 years of the government of Israel and the Jerusalem municipality to issue all but a handful of housing construction licenses for Arab residents of the city. It is virtually impossible for an East Jerusalem Arab (who is a resident of Israel but not a citizen) to buy a home in most of West Jerusalem or in many Jewish neighborhoods in East Jerusalem, where the land is leased only to full-fledged Israeli citizens by a state ownership institution.

Netanyahu argued loudly that it was inconceivable that Jews could live in Paris, New York and anywhere else in the world but not in Jerusalem. But Paris and New York are not Jerusalem, a de facto divided city. The annexation by Israel of Jerusalem's eastern half is not recognized by the international community, which almost unanimously designates it as the future Palestinian capital. Incidentally, few countries even recognize West Jerusalem as Israel's capital. It was interesting that Netanyahu did not argue the right of Jews to live in Jenin or Gaza.

The Shepherd Hotel project is billed as having followed normal licensing procedures. But construction there had been held up by the municipality for the past 20 years in consideration of the site's sensitivity (it also contains the house of Haj Amin al-Husseini, mufti of Jerusalem in 1948 and a Palestinian hero; the house is being preserved). The hotel was purchased 24 years ago by Irving Moskovich, an American who finances controversial housing projects for Jews in the midst of Arab neighborhoods in East Jerusalem. Had Netanyahu picked up the phone to Jerusalem Mayor Nir Barkat he could have stopped the project. Instead, it looks more like the prime minister specifically asked Barkat to finally launch the project.

Netanyahu claimed to be surprised by the American protest, noting that he had specifically told President Obama in their meeting in Washington several months ago that he was not prepared to accept any restrictions on housing construction in East Jerusalem. In Netanyahu's playbook this apparently means that the president of the United States no longer has a say in the matter. This remark is reminiscent of President Bill Clinton's quip, after the Wye River negotiations of 1999, to the effect that Netanyahu behaves in their meetings as if he's the president of the United States.

Perhaps most significantly, this new controversy reflects two negative dynamics. First, Netanyahu evidently believes that Obama is all talk and no action on the settlements issue and that he can be forced to retreat if Netanyahu plays it tough. Second, there is no discreet and highly trusted back channel through which the two can communicate. Whether this is by design--whether Obama doesn't want such a channel, or Netanyahu, or both--remains to be seen.

Q. Fateh is convening its Sixth General Congress in Bethlehem in early August. What is the significance, and why did Farouq Qaddoumi pick the present timing to accuse Mahmoud Abbas of murdering Yasser Arafat in 2004?

A. This will be the first meeting of the Fateh General Congress for 20 years. Until his death in November 2004, Arafat repeatedly delayed convening the congress, evidently preferring to work with his aging cronies from the Tunis days rather than risk new leadership elections and the rise to power of an indigenous West Bank and Gaza leadership.

That PLO Chairman and Palestinian Authority President Mahmoud Abbas agreed to convene the congress at all reflects pressure from the younger generation of Fateh leaders, men in their fifties who want to reform the movement, remove the corrupt "dinosaur" apparatchiks and improve Fateh's chances of winning another round of elections against Hamas. Those elections could be held as early as next January if Hamas and Fateh, with Egyptian mediation, succeed in forming a unity government.

The congress is being held in Bethlehem because Abbas preferred it that way, since he can exercise maximum control over who attends (Abbas actually claims he was unable to convince any Arab country to host it). Qaddoumi, whose official title is Fateh Central Committee Chairman, making him technically no. 2 in the hierarchy, has always opposed the Oslo accords, the formation of the PA and the two-state solution and refuses to set foot in the Palestinian Authority. Thus Qaddoumi's politics continue to be "revolutionary" and rejectionist compared to Abbas.

Qaddoumi's timing for airing highly specious accusations against Abbas is an attempt to sabotage the congress. Qaddoumi held a press conference in Jordan last week at which he presented a document purporting to be minutes of a meeting held in March 2004 between Abbas, then-Israeli PM Ariel Sharon, Fateh's Mohammad Dahlan, who then held a senior security post, and additional Israeli and American officials. The alleged topic of discussion was how to poison then PLO and PA leader Yasser Arafat, who died later in the year of unexplained causes.

That Qaddoumi's allegations raised hackles in Ramallah was evident from the PA's over-reaction. Qaddoumi was said to be suffering from "senility, hallucination and hysteria". A protest was sent to Jordan for allowing Qaddoumi to hold a press conference on its soil. PM Sallam Fayyad closed down the al-Jazeera office in Ramallah for having treated the allegations seriously. Because Qaddoumi is known to be "Syria's man", this incident can only increase Abbas' suspicions regarding Damascus' Palestinian agenda.

But Qaddoumi is an historic figure in the annals of Palestinian resistance. His supporters' claim that the upcoming Sixth Fateh General Congress amounts to a historic joke--"a liberation movement holding its conference in the shadow of the occupation"--rings true with many Palestinians. Yet the conference is of crucial importance if there is to be any hope at all of reforming and rejuvenating Fateh so it can defeat Hamas in the court of Palestinian public opinion.

Q. Israel Navy submarines and missile boats have been going back and forth through the Suez Canal very noticeably. What's behind this unusual display of naval force?

A. Two factors appear to be at work. For one, while Israel Navy ships have been able to use the Suez Canal since Israel and Egypt made peace 30 years ago, these latest very visible crossings are a demonstration of a certain upgrading in Israeli-Egyptian security relations. The upgrading reflects the strategic conclusions Egypt appears to have drawn from its recent experience with Hezbollah spying and sabotage in the heart of the country and Iranian smuggling of arms the length of the country from the border with Sudan all the way to Gaza. The Egyptian leadership is not afraid to advertise the fact that it is cooperating with Israel, however passively, against militant Islam in general and Iran, Hezbollah and Hamas in particular.

The second factor is related. Israel's Dolphin class submarines, the ones seen in the Suez Canal, reputedly carry nuclear-capable missiles. That capacity is generally assumed to constitute a second-strike capability meant to deter Iran from believing it could carry out a surprise nuclear attack and destroy Israel before the latter could respond. For this purpose the Dolphins are likely to use very deep Mediterranean waters off Crete where they are virtually undetectable.

While the Israeli submarines and their missile boat escorts are not known to have proceeded in the Red Sea south of the Sinai Peninsula before returning to the Mediterranean, the message their Suez Canal passage sent is that Israel can deploy them "up close" against Iran, with tacit or even open Egyptian support. In this sense, the submarines' Suez Canal passage can be seen as an exercise in deterrence not against Iranian attack but against Iran's nuclear weapons program.