Key Proposition

Amid current shifting global landscapes, with major threats on the horizon and the potential for deleterious long-term damage to prospects for the two-state outcome, the United States has the responsibility and opportunity to recalibrate its position on West Bank settlements in order to better align its principles, objectives, and means in the service of more effective policymaking. This entails reorienting the U.S. position firmly and unambiguously in support of two states by highlighting the ways in which Israeli settlements make that outcome increasingly difficult, if not impossible. It also entails working toward a U.S.-Israel agreement over a partial but strict settlement freeze, implementing a policy of differentiating between different settlement construction in an attempt to identify spots where construction harms a future two-state outcome versus spots where new construction will not meaningfully impact the possibility of territorial separation.

The greatest point of tension in the U.S.-Israel relationship has historically been Israeli policy in the West Bank. Apart from its security dominance over the Palestinian arena, the starkest manifestation of Israel’s occupation is the establishment, maintenance, and expansion of Israeli settlements. Israel and the United States repeatedly find themselves at odds over this contentious issue. Efforts to align positions, diplomacy, international law, historical and religious motivations, domestic politics, and security considerations have occurred against the backdrop of a deepening Israeli presence in the West Bank. Recurrent attempts by successive American administrations to achieve a two-state outcome to the Israeli-Palestinian conflict and to adequately rein in settlement construction have, up until now, failed.

This largely ineffective approach must now contend with a new phase of activity that is accelerating in ambition, scope, and velocity, coinciding with the formation of Israel’s 37th government under Prime Minister Benjamin Netanyahu, the most far-right, pro-settlement government to date. This can be characterized by an ongoing, accelerated de facto annexation, which is propelling Israel toward a less secure and non-democratic one-state reality, occurring in parallel to creeping de jure annexation, defined as the redesigning of the Israeli legal and administrative landscape to change the nature of Israeli control of the West Bank without a formal declaration. The specter of formal de jure annexation looms large, but owing to substantial domestic and international opposition and the ability of the Israeli government to achieve some of its goals via alternative, “under the radar” means, we assess that its likelihood remains low.

Profile of the Settlement Enterprise

Almost every successive Israeli government has invested substantial resources and political capital in the settlement enterprise. Meanwhile, under every corresponding U.S. administration, construction in the West Bank has occurred. Under such fertile conditions, settlements have thrived. The patchwork of settlements, outposts, agricultural swathes, networks of roads, and civilian and military infrastructure traversing the West Bank represents the most visible frontline of the conflict. The settlement enterprise is characterized by a number of major features and prevailing trends; its geographical spread driven by an interplay of factors; its population density concentrated within settlement blocs along the 1967 lines; its ideological nature rooted in national-religious and quality-of-life motivations; and the evolving legal framework surrounding and sustaining it.

Implications of Expanding Settlement Growth

Throughout history, initiatives aimed at resolving the conflict have proposed various formulas for partitioning the land into two states or political entities, reflecting the aspirations of two distinct peoples and national movements. Despite declining support for a two-state solution among the Israeli and Palestinian publics in recent years, it remains the primary anchor for the official positions of key actors. Achievement of this objective has been hindered by a lack of domestic legitimacy, owing to the disproportionate influence of national-religious veto-wielding constituencies, the absence of a viable political process, cyclical rounds of violence, the intra-Palestinian split, and the institutionalization of the occupation. The settlement enterprise plays a pivotal role in this reality, exacerbating Israel’s slide into a post-separation or irreversible, unequal one-state reality. With the passage of time, the prospects of realizing a two-state outcome diminish, and with it comes a host of detrimental implications for Israel’s political and diplomatic standing and the stability of the PA. This trend is exacerbated by the heavy burden of the settlements on Israel’s security establishment and economic integrity, as well as the pervasive humanitarian toll shouldered by the Palestinian people.

Why Settlements Should Be Countered

That said, Israeli settlements directly contravene U.S. interests and have consequently led to decades of American presidents and Congress seeking to limit the enterprise. On the security front, Israel’s role as a strong American partner in the Middle East able to devote resources to countering regional actors who threaten U.S. and Israeli interests is compromised by its investment in the West Bank arena. Politically, the revered shared values between the two countries suffer, as the growing disparity and inequities between Jews and Palestinians living in the West Bank increasingly clash with the democratic and liberal principles upheld by many Americans. Reputationally, the U.S. is increasingly seen as an outlier among Western democracies in its wielding of its U.N. Security Council veto on Israel’s behalf when confronted with resolutions on settlements. In pursuit of a fair resolution to the conflict, the settlements issue directly challenges the U.S.’ role as a historical mediator as well as its policy on promoting democratic values and human rights outcomes. Moreover, the solidification of a new regional alignment through the Abraham Accords and normalization agreements presents another point of concern for the U.S. in countering settlements. The failure to broaden the framework, combined with other factors, has revealed that Israel’s increasing presence in the West Bank hampers the normalization process and caps strategic cooperation.

U.S. Policy on Settlements: Historical Overview

The U.S. approach to the question of Israeli settlements has varied over time and across different administrations. While influenced to some degree by the Israeli prime minister of the day, generally the U.S. has opposed the building and expansion of Israeli settlements, largely viewing them as illegal, illegitimate, and an obstacle to a peaceful resolution to the conflict. With few exceptions, U.S. opposition has remained direct in rhetoric. But American willingness to go beyond statements and diplomatic engagements has waned significantly over the past two decades, mainly because of a changing global and national order of strategic priorities, innate pro-Israel tendencies, fear of domestic political implications, and an aspiration that a resolution to the conflict would end the need to butt heads over this most contentious issue.

Over the years, American diplomats have held hopes that addressing the issue of borders within the framework of final-status negotiations would also pave the way for a resolution on settlements. This has been the case from the early years of President Johnson, when the matter gained prominence, to the dynamic attempts of President Bush George W. Bush to curb settlement expansion, to the near exclusive focus on a settlement freeze during President Obama’s first term that ultimately failed, to President Trump’s almost full departure from longstanding U.S. policy, to the full-frontal challenges faced by the Biden administration today.

U.S. Policies on Combating Settlements: A Typology

The United States possesses a range of tools at its disposal to counter settlements, which have been utilized to different degrees by various U.S. presidents.

Bilateral diplomatic pressure: Direct diplomatic efforts by the U.S. administration to exert pressure on the Israeli government, including public statements and actions by U.S. officials and private diplomatic efforts.

Multilateral diplomatic pressure: Efforts by the administration to exert pressure, or allow pressure from other parties to be exerted on Israel through international organizations or through joint action outside of the U.N context.

Cultural diplomacy: Use of soft power to influence public opinion in both Israel and its allies in the international community.

Economic measures: Use of economic disincentives to exert pressure on Israel to reverse, halt, or limit settlement activity, including withholding loan guarantees or aid or by imposing economic sanctions tied to Israeli settlement or annexation measures.

Major Threats in the Coming Months and Years

Israel’s 37th government’s policy in regard to control of the West Bank presents three major threats to the viability of a two-state outcome, the remnants of the Oslo framework, and the overall stability on the ground. All three share the same purpose and counter longstanding U.S. interests and positions, warranting steadfast American opposition.

The following risks encompass the core pillars of the settler agenda typified by applying Israeli sovereignty to the West Bank, upgrading national infrastructure, the legalization of settlements and outposts, the renewal of land registration, prevention of “illegal” Palestinian construction in Area C, and undermining of the PA.

Threat 1: Accelerated de facto annexation of parts of the West Bank: This refers to the consolidation of Israeli control over the West Bank, achieved through the expansion of Israeli settlements and other quantitative and qualitative means, without an official declaration or formal legal process of annexation to grant it the status of official Israeli territory. Over the past several years, there has been a noticeable acceleration of this kind of annexation, marked by the expansion of settlement infrastructure, evictions and demolitions of Palestinian homes, the takeover of Palestinian land through agricultural outposts, and the legalization of outposts. Creeping de facto annexation has been taking place for years, and the United States has confronted this dynamic with different tactics, mostly unsuccessfully in light of the results on the ground. The anticipated changes are outlined below, while the full report provides a comprehensive overview of the latest developments and relevant data points.

Expected quantitative changes include the following trends:

• Increase in funding for and approvals of the construction of settlements
• A surge in the demolition and forcible transfer of Palestinian communities aiming to consolidate Israeli control over Area C

Expected qualitative changes include:

• Strategic placement of settlements designed to control key areas and disrupt the contiguity of a future Palestinian state
• Legalization of outposts that are deemed illegal even under Israeli law
• Increase in funding for and legalization of the relatively new phenomenon of agricultural outposts, ultimately resulting in intensified land takeover
• Increase in funding for and approvals for settlement-related infrastructure, mainly roads
• Easing planning, approval, and construction processes
• Israeli takeover of Areas A and B

Threat 2: Creeping de jure annexation of parts of the West Bank: The newest category of expected actions in the settlement realm entails redesigning the Israeli administrative landscape to change the nature of Israeli control of the West Bank, without a formal declaration. Under such remodeling, Israeli settlers will come under a military regime in name only and will be subjected to increasing civilian control with adherence to Israeli civilian laws, regulation, and administration. These seemingly administrative changes further blur the lines between an allegedly temporary military control, pending a final-status agreement, and that of a permanent civilian nature. These changes, if enacted, amount to a newfound strategic thrust that will upend the rules by which the settlement enterprise has operated for decades in Israel.

The coalition agreements and their initial implementation included the following elements:

• A minister from Religious Zionism holds a position within the Ministry of Defense, effectively heading a newly created settlement administration, with transferred powers to control civilian issues in the West Bank that no longer require the approval of the Minister of Defense.
• Repeal of the 2005 Disengagement Law that made settling of the northern West Bank illegal.
• According to the coalition agreement, the additional minister in the MoD was supposed to have the authority to appoint the head of the COGAT. Yet under the eventual agreement, the additional minister was handed authority over numerous— but not all—responsibilities of COGAT and the CA. In addition, a settlements administration was established to manage and direct settlement activities.
• In the legislative branch, a member of Religious Zionism will lead the parliamentary Constitution, Law and Justice Committee, which also heads the Subcommittee for Judea and Samaria and the Seam Zone within the MoD.
• Legalization of outposts and buildings within authorized settlements built on privately owned Palestinian land by means of Knesset legislation.
• Changes to the West Bank-related legal advisory and representation mechanisms.
• Continuing the installation of Israeli law via military orders.
• The state’s responses to petitions filed with the High Court of Justice concerning these areas of responsibility will be placed under the additional minister in the MoD.
• Expanding the powers of the Ministry of Public Security transforming it into the Ministry of National Security, with implications for law and order in the West Bank and East Jerusalem.
• Increasing the capacity—authority and administration—of civilian (non-defense) ministries to become directly involved in promoting the settler agenda. This encompasses the Israel Antiquities and the Council for the Preservation of Israel Heritage Sites, the Planning and Agricultural and Settlement Development Authority, the Green Patrol, and the National Unit for Enforcing Planning and Construction Laws.
• Land registration in Area C of the West Bank.

Threat 3: Significant/formal de jure annexation of parts of the West Bank: This refers to the formal annexation of large areas of the West Bank, possibly arising from the culmination of the preceding two threats. The annexation of extensive parts of Area C would have serious consequences for all parties, likely triggering a chain reaction that could lead to the collapse of the PA. Formal annexation would fundamentally erode the viability of a two-state outcome by altering the territorial balance between the two sides and effectively eliminate a Palestinian partner for a two-state agreement, thereby risking an almost immediate security deterioration. Moreover, annexation would undermine the regional normalization processes, including the 2020 Abraham Accords, which have ushered in a new era of relations between Israel and several Arab states, predicated on Israel halting its annexation of West Bank lands.

The possibility of major de jure annexation remains unlikely, but is still more than a theoretical concern owing to powerful factions within the Israeli government. Despite the successful prevention of formal de jure annexation, there is a risk that predominant U.S. focus on this threat may enable the progression of the two more proximate threats, making formal de jure annexation inevitable.

Policy Proposals

There are two elements to a U.S. policy adjustment on settlements. The first involves the adoption of a set of policies that will reorient the U.S. position firmly and unambiguously in support of two states by highlighting the ways in which Israeli settlements increasingly hinder and preclude its realization. The second proposes a shift in how the United States approaches the settlement issue with Israel either bilaterally or unilaterally. This shift prioritizes the functional impact of settlements on a future diplomatic resolution, rather than treating all settlements as functionally equivalent.

PROPOSAL 1: RE-ORIENTING U.S. POLICY IN SUPPORT OF TWO STATES

BUCKET 1: Adjust and Clarify U.S. Positions

• Clarify the U.S. position regarding its support for a two-state reality (and ultimately a permanent outcome) and the conditions for its emergence
• Adjust the U.S. position in support of a two-state outcome by recognizing the attachment of both peoples to the land
• Introduce and codify updated parameters for a two-state outcome, including the integrity of the 1967 lines with mutually agreed and equal swaps, making it clear that settlements are violations of international law until the conclusion of a final-status agreement
• Reassert U.S. opposition to settlements as longstanding bipartisan policy
• Reiterate U.S. position on the illegality and problematic nature of settlements and non-recognition of annexation based on international law

BUCKET 2: Improve U.S. Multilateral Approach

• Continue to codify opposition to Israeli annexation of the West Bank in the context of further regional normalization agreements, and ideally attach Palestinian deliverables to future agreements
• Make clear to Israel that the United States will not exercise an automatic defense of settlement policies in international fora

BUCKET 3: Bilateral U.S.-Israel Engagement

• Mobilize a sustained public diplomacy effort that makes the case against settlement activity on Israeli terms
• Continue to exercise pressure on the settlement issue, even in parallel to negotiations
• Support Palestinian development in Area C, including zoning, planning, and construction
• Continue the systematic monitoring and reporting of settler violence to hold Israel accountable
• Continue to codify non-recognition of Israeli sovereignty in the West Bank via bilateral agreements and regulations
• Develop a set of economic incentives that counter settlements such as preferential trade conditions or investment opportunities in exchange for reversing and/or halting settlement activity
• Support a voluntary compensation and absorption law for those settlers living east of narrowly defined settlement blocs

BUCKET 4: Improve U.S. Societal and Situational Understanding

• Implement accessible, short geographical education for U.S. officials
• Develop literacy in settler and settlement-related worldviews and motivations, including religious and secular ideological drivers
• Increase U.S. investment in monitoring Israeli settlements in the West Bank

PROPOSAL 2: DEVELOPING A U.S.-ISRAELI AGREEMENT OVER A PARTIAL SETTLEMENT FREEZE IN THE CONTEXT OF A DIFFERENTIATED APPROACH TO SETTLEMENT CONSTRUCTION

While maintaining strong opposition to settlement activity, the United States should reach an agreement with Israel on a partial but strict settlement freeze, with clearly defined terms. This would differentiate between different settlement construction in an effort to identify areas where construction harms a future two-state outcome, versus areas where new construction will not meaningfully impact territorial separation. If such an agreement is not possible, the United States should internally determine how to differentiate such construction and tailor its response accordingly. More strident measures should be taken against Israeli construction in territory deemed problematic by the U.S. owing to its impact on a two-state outcome.

Towards developing a differentiated approach, the United States should follow a strategy based on three principles. This approach should only be implemented through a bilateral agreement between the U.S. and Israel, ensuring clear Israeli commitments in return.

PRINCIPLE 1: In the context of a bilateral U.S.-Israel agreement, recognizing areas that will be part of Israel under any future permanent-status resolution and limiting settlement construction to those areas only.

Areas that will become part of Israel under any future agreement are those that the Palestinian leadership previously agreed to with an equal territorial swap and refer to the Palestinian “1.9%” map,” presented by the PLO in the 2008 Annapolis negotiations. Incentivizing Israel to build in this area encompasses roughly 60% of the Israelis east of the 1967 lines, including most Jewish neighborhoods of East Jerusalem (except Har Homa, and additional harmful plans such as Atarot).

PRINCIPLE 2: In the context of a bilateral U.S.-Israel agreement, preserving a reasonable negotiating space between the 1.9% line and the line of the barrier without prejudging the outcomes of negotiations.

A realistic zone of possible agreement between the two sides both excludes from the freeze areas that include large numbers of settlers that are not overly intrusive into the West Bank (such narrowly defined built-up areas of Givat Ze’ev, Ma’ale Adumim, Efrat, and Har Homa), and includes in the freeze areas that are highly detrimental to the viability of a two-state outcome (such as Jewish construction in Arab neighborhoods of East Jerusalem, E-1, Givat Hamatos and the eastern development of Har Homa, Atarot, E-2, and future harmful plans).

PRINCIPLE 3: In the context of a bilateral U.S.-Israel agreement, clarifying commitment to a two-state outcome.

This approach clarifies that negotiations will focus on the area between the 1967 lines and the barrier when determining the final border between Israel and Palestine. It entails enforcing a total freeze in all areas east of the barrier, asserting Israel’s renunciation of sovereignty claims east of the barrier, and enacting voluntary compensation and absorption law for settlers living east of the barrier.

If such an agreement cannot be reached, the U.S. should unilaterally shift its position on settlement activity to accord with the same approach laid out in these three principles. This would involve a different strategy than a bilateral agreement as it would not grant formal approval to any type of settlement activity, but it would employ the same geographic criteria in order to assess the relative harm to a two-state outcome of Israel government settlement plans, and deploy varying levels of opposition to align with the severity of the plans rather than allow any settlement construction to take place unopposed.

Whether through a bilateral agreement or through a unilateral policy shift, the United States should pursue a differentiated approach to Israeli settlements. Doing so will clearly place a two-state outcome at the center of U.S. policy, allow administrations to focus their energies on the Israeli moves that are the most damaging to U.S. interests, and shift away from a dynamic that has developed over five decades in which Israeli governments have a clear advantage over the United States despite nearly unbroken American objections.