Aaron David Miller, who is certainly no hawk, says no, settlements are almost immaterial to the dispute at the moment:
Successive American administrations have not taken the settlement issue as seriously as needed. The U.S. line has always been the same: Getting to the negotiations is the only way Palestinians can address the settlement issue. Even then-Secretary of State James Baker -- who took a tough line with the Israelis on settlements and occupation -- believed that negotiation was the only way to resolve this issue, saying to the Palestinians in 1991: "If you're asking that we send in the 82nd Airborne, forget it."
But even if the settlement issue were resolved today, negotiations would still confront another galactic challenge: a crisis within the Palestinian national movement, with two authorities governing two discreet areas with two different security services, two different patrons and two different visions of the Palestinian future. The upshot of the battle between Hamas and the Palestinian Authority is that without a monopoly over the forces of violence in Palestinian society -- without one authority to silence the guns and rockets -- no agreement can be implemented.
On certain days of the week, and in certain moods, I used to think that the U.S. could pressure Israel out of the settlements, which is why I wasn't critical of President Obama's early attempts at same. But it doesn't work. Israel wants the settlements to be a subject of negotiation with the Palestinians, along with everything else -- and not the subject of a preemptive concession -- and it seems that it is during negotiations (as President Clinton showed during Camp David) that the U.S. could best make the case against settlements, just as it is during negotiations that the U.S. could move the Palestinians away from their position on the so-called right-of-return. Aaron Miller:
The idea that the United States can pummel a close ally into accepting a deal that undermines its security or political interests is flat-out wrong. The Middle East is littered with the failed schemes of great powers that tried to impose their will on small tribes.
Pressuring Israel (and the Arabs, too) has been an inevitable part of every successful negotiation in which the United States has been involved. But that fight must occur within a relationship of trust and confidence, and with U.S. willingness to offer not just the prospect of pain but the prospect for gain.
UPDATE: A couple of Goldblog readers have asked if the above post contradicts my previously-asserted assertion that Bibi should freeze settlements in the interests of morality, demography and the maintenance of good relations with the U.S. Yes, of course! Everything contradicts everything. But also, no. It would be wonderful if Bibi would freeze, and, of course, reverse the settlement project, for Israel's own sake. What I'm saying here is something different: It might be a bad idea to bring pressure on Israel on the issue of settlements before negotations even begin, for the simple reason that the U.S. would like the negotiations to succeed, but they won't have any chance of succeeding if pre-conditions sink them. I'm also suggesting that the entire peace process won't amount to much until the Palestinians resolve their civil war.