Israel has nuanced its 'Iran first, then the Palestinians' stand - now say they can work with the Palestinians [by which they no doubt mean improve their economic woes] but no final agreement is possible until Iran settled - so nuanced, yes, but in essence same meaning: Bibi is playing hardball. Now, you could argue that they're leveraging the Iran threat in order to be allowed to deal with the Palestinians as they see fit - and given the current conservative government's jaundiced view of the Palestinian issue that scenario is certainly plausible. But I don't buy it: I think they truly believe Iran is the key - and I would guess that they are somewhat skeptical that any agreement made re the Palestinians as 'reward' for not striking Iran would be honoured, or sufficiently honoured, when push comes to inevitable shove.
No doubt why you're seeing Obama administration move quickly to try and get ahead of the story - Clinton saying that Israel risks losing Arab support as regards Iran if they choose to put off dealing with Palestinians. That seems like a hollow threat: one, I don't think Israel believes it's possible to deal with the Palestinians given current circumstances; two, I don't think they care about Arab support re Iran because they know it's going to be there no matter what - Sunni Arabs do not want Shite Persians having the bomb; three, I don't think they believe that Iran is at all amenable - I think they view it as a matter of fact that nothing short of a military commitment will deter Iran from its obvious intentions; and four, I think they're convinced that not even a nominal peace in the Mideast is possible unless Israel is viewed as strong, if not indomitable, and Iran's ambitions, which feed directly into Hamas and Hezbollah, are effectively neutered.
