The feud between the U.S. and Israel escalated another notch yesterday, with a report that the U.S. would consider abstaining from a United Nations Security Council vote critical of Israeli settlements in east Jerusalem.

As one of the five permanent members of the Security Council, the U.S. can veto any issue that comes before the Council.  The U.S. has traditionally killed any attempt to use the UN as a platform for criticizing Israel.  If America were to abstain, the resolution condemning Israel for constructing settlements in east Jerusalem could pass.  This would be a significant break from past practice and clear evidence of a fissure between Obama and Netanyahu.

I don't actually expect the U.S. to abstain.  This story is based on an unsubstantiated report, not a declaration from the U.S. government, and could be nothing more than a rumor.  Furthermore, this would be a major deterioration in the U.S.-Israel relationship, and I don't believe President Obama is interested in taking that step.

Instead, I read this as a clear warning from Washington to Israelis.  It would appear that Obama is heeding the advice from the George Mitchell camp over the Dennis Ross camp, and taking a harder line.  The situation brings to mind the oft-quoted quip allegedly uttered by President Clinton after a meeting with Netanyahu in the 1990s, recounted by Andrew Exum earlier today

He thinks he is the superpower and we are here to do whatever he requires.

In short, this is a subtle message from Obama to Netanyahu - we hold the power here, and don't you forget that.

Politico's Laura Rozen has a behind-the-scenes piece up about the debate within the Obama Administration on Israel policy.

Sources say within the inter-agency process, White House Middle East strategist Dennis Ross is staking out a position that Washington needs to be sensitive to Netanyahu’s domestic political constraints including over the issue of building in East Jerusalem in order to not raise new Arab demands, while other officials including some aligned with Middle East peace envoy George Mitchell are arguing Washington needs to hold firm in pressing Netanyahu for written commitments to avoid provocations that imperil Israeli-Palestinian peace talks and to preserve the Obama administration's credibility.

I think it's a mistake to portray this as a dichotomous choice between supporting Netanyahu and holding his feet to the fire.  Both sides here have merit.  Israel is a functioning democracy, and only an old-fashioned realist would entirely disregard the domestic political forces that impact Netanyahu's decision-making process.  Conversely, if Israel continues to blatantly disregard American requests without punishment, any remaining credibility the U.S. has in the region as an honest broker will be lost.

Obviously there is no easy solution.  But Mitchell's point cannot be disregarded - the Obama Administration must extract some concessions from Israel, particularly regarding settlements, or any hope of progress towards peace will be damaged.