Donald Macintyre: Netanyahu's moment of decision

He must respond to a US President who has a worthy impatience to secure peace

For a politician who prides himself on the persuasive powers of his words, Benjamin Netanyahu has been notably reticent since his election victory in February.

Not one major interview with an Israeli newspaper, let alone a foreign one. So even if he himself had not gone some way to increase anticipation of the speech he will deliver tomorrow evening, it would be of real importance in defining how he plans to conduct his premiership. Above all it will be watched elsewhere as a response to an American President who has – so far – shown signs of a commendable impatience to secure the Middle East solution which has eluded his predecessors for more than 40 years.

The Israeli Prime Minister is facing severely conflicting pressures. On the one hand, he risks endangering a relationship with the US which is of central importance to a majority of the Israeli public. Indeed, the damage he inflicted on it during the Clinton years, as he is reported to have since acknowledged, was part of what led to the downfall in 1999 of his first term in office.

On the other he is facing acute pressure from religious Zionism and the more secular-nationalist hard right in his own party not to surrender even partially to Washington's desire that he halt construction in Jewish West Bank settlements and clear the way for serious negotiations on the establishment of a Palestinian state.

Nothing is yet certain and the speech will not be completed until today. But on the two issues of the moment, whether he will finally say the words "Palestinian state" and how he will respond to the US demand for a settlement freeze, it looks as if he will try to steer a difficult course through the middle, a course in which, as he must know, the main danger he has to deflect is that of enraging everybody – Washington for not going far enough and his own right for going too far.

On the first, he may well repeat his demand that the Palestinians recognise, in any final deal, Israel as a "Jewish State", which they have hitherto resisted, not least because it appears to discriminate against more than one million Palestinians living in Israel.

Never mind that, even Dov Weisglass, the former henchman of Ariel Sharon and the man who said the point of withdrawing settlers in Gaza was to put the peace process in "formaldehyde", has said that such a precondition is neither "dignified or believable". The Prime Minister may then go further by saying – for the first time – that he will accept a Palestinian state but with the explicit proviso that it is demilitarised.

Earlier this year, while he was still leader of the opposition, Mr Netanyahu was asked at a press conference – by The Independent, as it happens – what his line was on the question of a Palestinian state. He indicated there was much less difference between him and other Israeli politicians, such as his Kadima rival Tzipi Livni who advocated two states, than was generally realised. After all, she too did not want a fully sovereign Palestinian state with its own army, control of its airspace, and so on. Since he himself did not want, as he keeps insisting, to rule over the Palestinians, there was not much difference between what he envisaged and what others like her did, whatever name you gave it.

There is something in this, at least in relation to Ms Livni. She almost certainly does not envisage the Palestinians having what most people would assume would be the full characteristics of a true state. But, by choosing to specify demilitarisation now, Netanyahu would be open to the charge of once again setting high hurdles before any negotiations – including, for example, what exactly would be the limitations on the West Bank security forces on which the Americans and British have lavished considerable resources in training, and what would be the role of any international force in a future Palestine.

Similarly on the "Jewish state". Netanyahu's officials are at pains to say this is a precondition of an agreement, not of talks beginning, and that he is fully committed to progress with the Palestinians on the economic, political and security tracks. And he will no doubt commit to the 2003 Road Map which does envisage an eventual Palestinian state. But while the "Israel as a Jewish state, Palestine as a demilitarised state" formula, if such emerges tomorrow, may be a clever attempt to shift the difficult choices on to the Palestinian leadership in Ramallah, and indeed the Americans, it may still be seen as setting yet more pre-emptive conditions as a way of deferring substantive agreement once again.

Particularly if, as seems all too likely, Netanyahu rejects Washington's so far unequivocal calls for a settlement freeze. Mr Netanyahu could well grab an easy headline by promising not only that he will remove outposts illegal even in Israeli law but that he will not build on E1, the planned corridor linking the big settlement of Ma'ale Adumim to Jerusalem, which even the Bush administration put its foot down about. But this would still leave intact the imminent threat of more expansion, not only in existing settlements but, even more combustibly, in the inner Palestinian neighbourhoods of Arab East Jerusalem.

The Netanyahu government is annoyed that it cannot continue the cosy oral agreement Ariel Sharon and Ehud Olmert enjoyed with the Bush administration for "natural growth" in the Jewish settlements in the West Bank. The Obama emphasis on "honesty" in relation to the Middle East appears to rule out any repeat of such under-the-counter deals. But, in any case, the very idea of "natural growth" in settlements illegal under international law should have been intolerable, even if it were not for the patent injustice that Palestinians are systematically restricted from building to accommodate their own population growth in East Jerusalem and in those large swathes of the West Bank-Area C under Israel's direct control.

Assuming that Netanyahu does not take the world by surprise tomorrow, confront his nationalists head on, pledge a total settlement freeze, and commit himself to a Palestinian state during his premiership, then the American response will be all-important. Tomorrow night will be a crucial test for the Israeli Prime Minister. The day after, an almost as crucial one for the President of the United States.