Jerusalem and Washington appear to have reached an understanding on settlement building similar to that articulated by George W. Bush in his 2004 letter to Ariel Sharon, which was subsequently rejected by the Obama administration. In effect, Israel can continue to build new houses in those areas that would not be part of any possible Palestinian state. Eran Lerman explains the benefits of this approach:
[The Obama-administration policy of] lumping together all Jews who live beyond the “Green Line”—including those who repopulated the Jewish Quarter of the Old City in Jerusalem!—puts the achievement and implementation of any future compromise at grave risk. It generates Palestinian hopes for a coercive outcome that would involve the uprooting of Jews from their homes on a massive scale. No Israeli government, not even one of the left, would accept such demands in full. Thus, a policy that signals that there might ultimately arise a prospect of total or near-total [Israeli] withdrawal feeds the fantasy, delaying the achievement of a practicable compromise.
Moreover, the legacy of a “total freeze” would make implementation of a peace deal impossible. Israeli governments have been willing in the past to make painful sacrifices. . . . But for sacrifices to be made without igniting a potential civil war, any Israeli government—of the left even more than of the right—will have to isolate the radicals and “dead-enders” from the mainstream settler community. For that mainstream, a sovereign national decision taken by a solid majority and based on a reasonable compromise, with provisions made for security and mutual recognition of the Palestinian and Jewish right to self-determination, might be acceptable. But the political conditions for such an acceptance will not exist in an atmosphere of severe hostility toward the existing settlements and toward all settlers as such. . . .
The understandings just agreed to are therefore much more conducive to the pursuit of peace—specifically, to the drawing of a future border—than is the misguided “purist” line [endorsed by the Obama administration and still held by many European governments]. True, it is not the free-for-all in Judea and Samaria that some Israelis had hoped for (which disregards the complex regional calculus that neither Trump nor Netanyahu can ignore). But it should be enough to lay the foundations for a diplomatic effort that would be more realistic, in its underlying premises, than the futile efforts of 2009-10 and 2013-14.
Read more on BESA Center: https://besacenter.org/perspectives-papers/west-bank-construction-can-help-solve-israeli-palestinian-conflict/