JERUSALEM (IPS) - Against all expectations, it's becoming the forerunner of a peace plan. Indeed, it might in the end even surprise the world as Israelis and Palestinians are forced into a peace. Even if, for now, it's shaping up as anything but peaceful.

It's a battle royale.

A Palestinian youth carries a box filled with stones during a protest outside Ofer prison near the West Bank city of Ramallah, March 31, 2010. According to an Israeli border police spokesperson, two border police officers were injured on Wednesday near the prison during clashes with Palestinian stone-throwers, protesting the arrest of 10 protesters, one of them senior Fatah leader Abbas Zaki, earlier this week at a checkpoint in Bethlehem. REUTERS/Mohamad Torokman

Israeli Prime Minister Benjamin Netanyahu continues to insist that the divide between his government and the administration of President Barack Obama is still bridgeable.

But nearly a week since his humiliation at the White House, beneath the Israeli leader's bluster, the message is beginning to sink in for Israelis: the United States means business.

Writes Ari Shavit, in Monday's lead story of the Tel Aviv daily Haaretz: "The demands that Obama made at the White House are the tip of the iceberg (below) which lies a dramatic change in U.S. policy towards Israel."

Shavit says that the Netanyahu government believes that the demands made of Israel by the President "point to an intention to impose a permanent settlement on Israel and the Palestinians within two years at the utmost."

In what, according to Israeli political sources, amounts to a "White House dictum," Obama made ten demands of Netanyahu.

Four relate specifically to Israeli actions and policy in occupied East Jerusalem; the rest relate to the negotiating process and the other core issues of the conflict which the U.S. intends to have on the table when both sides are pressed into the planned "proximity" talks that are to be run by Obama's special envoy, Senator George Mitchell.

As the U.S. awaits Israel's answer to the President's demands within ten days (following the Jewish Passover holiday week), four possible scenarios are evolving:

* Netanyahu sticks to his guns, draws into his laager. His besieged battleground is Jerusalem. So, the Israeli leader continues to declare the popular Israeli credo - as he did repeatedly last week in the U.S. - that "Jerusalem is not a settlement, it is our capital"; Israel, he insists, will continue building unhampered throughout all parts of the city.

With the backing of the bulk of his steady coalition, his rightwing flank, Netanyahu might well choose this tough stance, however risky.

* Netanyahu caves in: Because, as his defense minister and currently closest political ally, Ehud Barak, noted in a special security briefing on Sunday, for Israel, solid relations with the U.S. is the "pillar and cornerstone of our security....we must never lose sight of how important these relations are, or of our capability to act in harmony and unity with the U.S."

To follow such advice, albeit sound, would be uncharacteristic of Netanyahu, however.

The third scenario is probably the most likely, at least for the time being.

* It would involve Netanyahu continuing to prevaricate or manoeuvre by tip toeing his way between the U.S. demands while seeking to rally the Israeli public behind him for the fight. He would also solicit the backing of the President's domestic pro-Israeli opponents, however slim that hope, given Obama's recent triumphs both in domestic policy with his healthcare reform, and internationally with the new nuclear agreement with Russia.

Last month in an IPS interview, top Israeli political pundit David Landau argued that Obama should strive to secure an Israeli-Palestinian peace through what he defined as "the Grand Bargain: full-fledged support for Israel in the neutralizing of any Iranian nuclear threat in exchange for Israel accepting to give up its occupation of Palestinian lands."

The Israeli Prime Minister has suddenly awakened to realize that he needs to face a new choice - not simply linkage between neutralizing the threat of war with Iran and working for peace with the Palestinians, but between neutralizing the threat of war with Iran and an imposed peace.

That would seem to leave Netanyahu with only one way of pre-empting the U.S. plan that is now taking shape - the imposition of a settlement with the Palestinians, on U.S. terms. He takes the initiative.

* The fourth scenario therefore involves Netanyahu turning "the Grand Bargain" on its head: he formally pledges Israel's readiness for a fair peace with the Palestinians but only provided he gets, upfront, iron-clad guarantees, not only from the U.S., but from Europe and from the Arab world, that Israel need have no fear - present or future - from any Iranian nuclear weapon.

It is almost 43 years since the 1967 Arab-Israeli war is said to have changed "forever" the face of the Middle East.

This is a moment when "forever" post-1967 is coming to an end; the Middle East is fast approaching its most important crossroads since June 1967.