What exactly did the U.S., Israel agree on settlement construction?

West Bank settlements have long been a bone of contention between Israel and the United States, which views them as an obstacle to peace. Over the past few years, however, Israel tried to reach a tacit understanding with Washington on settlement expansion, which is now put to the test: President Barack Obama demands a complete and utter construction freeze, whereas Prime Minister Benjamin Netanyahu insists on building in settlement blocs, as his predecessors Ariel Sharon and Ehud Olmert during George W. Bush's term in office.

The settlement controversy reached its zenith at the twilight of Yitzhak Shamir's government in 1992. Israel had asked for loan guarantees to help fund the absorption of hundreds of thousands of immigrants from the recently collapsed Soviet Union. Then U.S. President George H.W. Bush conditioned the aid on a complete settlement freeze. Shamir was defiant, and Bush remained firm.

Yitzhak Rabin, who succeeded Shamir as prime minister, reached an oral agreement with Bush on the loan guarantees. Rabin promised that Israel would complete the housing units that were under construction and limit future construction in all settlements in the Jordan Valley and the Jerusalem area, which Rabin dubbed "security areas." The New York Times reported that the construction would be for "natural growth" purposes, and would amount to building additional rooms in existing houses and infrastructure. In practice, Israel went far beyond that.