The Israelis and Palestinians have taken a small, halting step toward peace talks, a modest payoff for President Barack Obama's dogged, behind-the-scenes diplomacy. Word emerged Monday that the Israeli government had effectively frozen new Jewish construction in Jerusalem's disputed eastern sector. In short order, Palestinian President Mahmoud Abbas signaled he again would be ready to start indirect talks with Israel. The sudden change in direction was a victory for Obama's beleaguered Mideast envoy George Mitchell, who had spent more than a year in private talks and repeated trips to Jerusalem and Ramallah. The Israelis and Palestinians agreed to indirect talks mediated by Mitchell. But the whole effort blew apart last month when Vice President Joe Biden visited Israel on a mission to reassure the government of Prime Minister Benjamin Netanyahu of America's unwavering support shortly before the talks were to begin. As Biden was in the midst of his goodwill journey, the Netanyahu government announced it was moving ahead with new Jewish housing units in East Jerusalem, the occupied part of the holy city that rightly belongs to the Palestinians. The huge slap in the face for Biden and the Obama administration served to deepen an already ugly public rift over Jerusalem. The Palestinians quickly turned their backs on the new talks. The White House stood aside, enraged. Obama, from the earliest days of his presidency, had joined the Palestinians in demanding that Israel halt construction of more housing for Jews in the occupied, eastern sector of the city. Netanyahu routinely, bluntly, refused. After the blowup, speculation sprouted around Washington that Netanyahu's stubborn effrontery proved that Mitchell's one-step-at-a-time tactics would never work. Many experts were saying Mitchell would be pushed aside. The theory held that Obama would stand back for a period, let Netanyahu stew in his juices and then sweep back in with his own take-it-or-leave-it US peace plan. But with Monday's developments – on the heels of Mitchell's latest mission to the region – it became clear that Obama and Netanyahu realized the tiff had gone too far for too long, even if there was no public acknowledgment from either side. Netanyahu huddled with members of his Likud Party and denied any freeze was in place, said Danny Danon, a lawmaker who attended the meeting. “If we see there is a freeze, we will not sit quietly and the prime minister knows that,” he said. “This coalition will not allow the prime minister to freeze building in Jerusalem.” State Department spokesman P.J. Crowley wouldn't discuss what Israel was telling the United States but said the US has asked Israel and the Palestinians to take steps to rebuild trust. “We're not going to go into details about what we've asked them to do, but obviously this is an important issue in the atmosphere to see the advancement of peace,” Crowley said. Netanyahu is on a tightrope. He obviously hopes to end the rift with Obama and he knows easing back on or freezing Jerusalem settlement building is the key. It also could be the catalyst for a political crisis that would bring down his government under pressure from right-wing forces determined never to give ground on the eastern sector of Jerusalem – captured and annexed by Israel in the 1967 war. Abbas said he would consult with Arab League representatives Saturday on whether to agree again to the indirect talks. Netanyahu, meantime, will be playing an extraordinarily difficult domestic political game: saying one thing about Jerusalem and settlements while doing the opposite. And that can't last long, said Aaron David Miller, formerly a Middle East negotiator in Republican and Democratic administrations and now a scholar at the Woodrow Wilson Center. “It reminds me,” he said, “of the old Soviet Union where the government pretended to pay the workers and the workers pretended to work.”