Prime Minister Benjamin Netanyahu on Sunday rejected a description of U.S. President Barack Obama as Israel’s “greatest disaster”, a phrase a best-selling newspaper attributed to an anonymous confidant of the premier.

Besides defending Obama, Netanyahu tried to play down tension with Washington over Israeli settlement policy on occupied land in and near Jerusalem, telling his cabinet that Israel and the United States were “allies and friends”.

David Axelrod, a senior Obama adviser, also tried to smooth over the friction, citing a “deep, abiding interest” in Israel’s security and denying the president had intended to slight Netanyahu at low-profile White House talks on Tuesday.

There was no sign of a quick resolution of the settlement dispute with Washington which flared when Israel announced plans during a visit by U.S. Vice President Joe Biden three weeks ago to build 1,600 homes for Jews in East Jerusalem.

The United States is seeking unspecified goodwill gestures from Israel toward the Palestinians, who have refused to return to peace talks so long as settlement housing construction continues in occupied territory they want for a future state.

“We’ve got a real problem. You could say that Obama is the greatest disaster for Israel — a strategic disaster,” the Israeli newspaper Yedioth Ahronot quoted an unidentified Netanyahu confidant as saying.

A statement issued by Netanyahu’s office said: “The prime minister emphatically rejects the anonymous quotes about President Obama that a newspaper attributed to one of his confidants, and he condemns them.”

COMMENTS “UNACCEPTABLE”

Netanyahu was at pains to hammer home the message.

“I want to say clearly, these comments are unacceptable to me. They do not come from anyone representing me,” he told his cabinet in public remarks.

“The relations between Israel and the United States are those of allies and friends, and are based on tradition spanning many years,” he said.

In what political analysts termed a snub, Obama did not dine with Netanyahu during their White House meeting and, by keeping the talks closed to the media, denied him the courtesy of a photograph with the president.

Axelrod insisted Obama had not given Netanyahu the cold shoulder.

“This was a working meeting among friends. And so there was no snub intended,” Axelrod told CNN’s “State of the Union” news programme. “This was not about formalities … We have a deep, abiding interest in Israel’s security.”

Resisting U.S. pressure, Netanyahu has said Israel will not stop building in West Bank territory it annexed to East Jerusalem after capturing the two areas in the 1967 Middle East war.

“There were areas in which there was swift agreement,” Netanyahu told the cabinet about his White House talks.

“In areas where there was disagreement, we tried to take, and we did take, certain steps to narrow the gaps in order to move the (peace) process forward,” he said, without elaborating.

Netanyahu said he was continuing cabinet discussions on the issue. Peace talks with the Palestinians have been suspended since December 2008.

The feud with Washington put Netanyahu in a political bind. His government is dominated by pro-settler parties, including his own, and meeting U.S. demands on settlements after a 10-month partial construction freeze he announced in November, could endanger his coalition.

Quoting historical and biblical links, Israel considers all of Jerusalem its capital, a claim that is not recognised internationally. Palestinians want East Jerusalem as the capital of a state they seek to create in the West Bank and Gaza Strip.

(Additional reporting by Joseph Nasr; editing by Andrew Dobbie)

Jeffrey Heller