Israel, and American supporters of Israeli policies, have described the construction of Israeli settlements in occupied territory in various ways intended to portray Palestinian and (during the brief period it lasted) U.S. insistence on stopping the construction as an unreasonable imposition of preconditions for negotiations. The expansion of Israeli housing has been depicted as a local zoning matter, or as a reasonable accommodation of growing families, unworthy of being made into an international issue. Left unstated in diplomatic discourse have been the motivations of religious fulfillment in populating Eretz Israel, using the fruits of military conquest to benefit the citizens of one side of a conflict, or creating facts on the ground to limit future negotiating options (and possibly of using the issue as an excuse to torpedo negotiations while pinning the blame on the other side and its preconditions).
A report from Israeli Army Radio provides an additional look at thinking within the government of Benjamin Netanyahu about the handling of the settlements issue. Officials within the prime minister's office have raised the possibility of offering to extend the soon-to-expire moratorium on settlement construction in return for the United States releasing convicted spy Jonathan Pollard. This would not be the first time Netanyahu has inserted the Pollard matter into Israeli-Palestinian negotiations; he did so during his first term as prime minister when negotiating with Bill Clinton in the late 1990s.
Jonathan Pollard represents what was, at least in terms of the sheer volume of U.S. secrets that he compromised, one of the biggest cases ever of espionage against the United States. While employed by the U.S. Naval Investigative Service in the 1980s, Pollard sold classified documents to Israel by the suitcase. The documents involved numbered at least in the tens of thousands and probably many more. As with many other compromises of classified material, the damage that Pollard's espionage caused to U.S. security went beyond the direct exposure of secrets to the immediate recipients of the material. Additional damage possibly resulted from the Israelis making further use of their windfall in bartering with the Soviets or others over unrelated issues. What is more certain is that Pollard spied not only for Israel but also for apartheid-era South Africa and other countries.
So the settlements issue is one more item in the bazaar in which the Israelis are using their bargaining strength to squeeze what they can not just out of Abu Mazen but also out of the United States. It is another inning in a game they have played both under the table, as with Pollard's espionage, and over the table, as in exploiting President Obama's political need for progress in the peace process—a need that the Israelis see as a bargaining chip to try to get the spy released.
There is both irony and insult in this linkage. Israel has, of course, continuously played up an image of itself as a staunch friend of the United States to preserve a political climate in this country that underlies the many billions of aid, vetoes in the United Nations, and other voluminous U.S. support through the years. The support also has included close cooperation on security matters such as military technology. But even that evidently wasn't enough, so the Israelis embraced Jonathan Pollard and his wholesale stealing of U.S. secrets. After Pollard was caught, Israel initially lied about the nature of the case and tried to impede the U.S. investigation of it (which is a major reason we still do not know the full extent of the secondary and tertiary damage from Pollard's espionage). Kind of puts into perspective the nature of this friendship, and how Israel, or at least the Netanyahu government, views it.