I consider myself pro-Israel, but I'm a little surprised at the lack of knowledge being displayed here.
First of all, none of the land was ever technically conquered from the Palestinians. East Jerusalem and the West Bank were taken from Jordan, and the Gaza Strip from Egypt, during the Six Day War in 1967. These particular territories were recognised in United Nations Security Council resolution 242 as occupied territories, along with the Golan Heights (taken from Syria) and Sinai Peninsula (taken from Egypt). That same resolution called for a withdrawal from "territories occupied in the recent conflict", without specifying which territories (a deliberate omission which the Americans insisted upon) and introduced the "land for peace" formula as a basis for negotiations to resolve the final status of the territories.
This formula was subsequently put into practice when Israel withdrew from the Sinai Peninsula in exchange for a peace agreement with Egypt. As part of this agreement, Egypt withdrew its claims to the Gaza Strip. Later, a peace agreement was signed between Jordan and Israel, in which Jordan also withdrew its claims to the West Bank and East Jerusalem. Having withdrawn their claim to these territories, they were no longer officially claimed by any state (including Israel, which never annexed them except for East Jerusalem). Nevertheless, it has become accepted that they are to be regarded for the purposes of international law as territories under belligerent occupation, and thus that it is forbidden for Israel to transfer its civilian population into those territories (hence the international controversy over settlements). From an international law perspective, the same status applies to East Jerusalem, as affirmed by the Security Council when it declared Israel's annexation of that part of the city "null and void."
These territories are today usually collectively referred to by international organisations as the "Occupied Palestinian Territories", as they remain claimed by the PLO, with whom Israel has agreed to negotiate a final status agreement (See the Oslo Accords and subsequent agreements). That is a brief summary of the legal background which brings us to the current situation. Thus, from a purely legal perspective (in international law), construction in East Jerusalem is no different from settlement construction in the West Bank.
Nevertheless, international law can not serve as a roadmap for conflict resolution. There are a range of complex issues to be dealt with which require the parties, and the American mediator, to display flexiblity and sensitivity to the religious, emotional and national ties of both peoples to the land. Thus, although I am opposed to the Israeli settlements generally, I believe that the Obama administration is in error in attempting to pressure Israel into halting its construction in East Jerusalem. Israel has always drawn a clear distinction between construction in the West Bank (which is does not regard as a part of Israel under Israeli law) and Jerusalem (which is regarded as being under Israeli sovereignty). Although this distinction has no apparent basis in international law, it seems absurd that Obama would demand of them such a massive concession before negotiations have even begun. Indeed, even if Netanyahu WANTED to accept this demand, he is completely incapable of doing so given the nature of coalition politics in Israel. It should also be noted that there have as of yet been no American demands for similarly painful concessions from the Palestinian side.
In short, the American administration needs to tread carefully. If either side lacks confidence in them as a fair mediator, it is going to hurt chances of a resolution of the conflict.
