Obama quickly exacerbated these problems with a series of tactical mistakes. He drew a line in the sand over Israeli settlements, insisting that all construction outside Israel's 1967 borders stop in order to revive negotiations. Not only did this set a politically unachievable goal for Israeli Prime Minister Benjamin Netanyahu, it meant that anything short of a full freeze would look like a loss for Palestinian Authority President Mahmoud Abbas. Abbas was already politically damaged by the Gaza war; anything less than full Israeli compliance — particularly in East Jerusalem, which the Palestinians see as the capital of their future state — became politically intolerable for him, and he refused to negotiate until Israel complied with Obama's demand.

Washington then made matters worse by pressuring a reluctant Abbas to visit the U.N. General Assembly in New York for a handshake photo opportunity with Obama and Netanyahu, then sending him home with no tangible wins. By the fall, Abbas was talking of resigning. "Through either clumsiness or misunderstanding or outright error, they hurt him to the extent that he felt he had to step down," says Robert Malley, a former U.S. Middle East peace negotiator now with the International Crisis Group.