After hesitating until the very last moment, U.S. President Barack Obama decided to have his envoy veto the UN Security Council resolution condemning the settlements. The Palestinian-initiated proposal would have declared the Israeli settlement enterprise in the territories illegal. Fourteen members of the Security Council voted in favor of the resolution, and only the U.S. veto kept it from being passed.

The Palestinians lost the vote, but achieved their goal: They exposed for all to see the international isolation of Prime Minister Benjamin Netanyahu's administration and embarrassed the U.S. administration by revealing it as two-faced.

In explaining the veto decision, the U.S. ambassador to the UN, Susan Rice, denounced the "illegitimacy" of the settlements and stressed that Obama agreed with the resolution's sponsors but had to oppose it for political reasons.

Once again, the American superpower appeared to lose some of its prestige and international standing in order to defend the Israeli settlement enterprise, which enjoys the support of powerful patrons in Congress.

Netanyahu celebrated his victory over Palestinian Authority President Mahmoud Abbas, but he should view the U.S. veto as a warning. The world's patience over continuing construction in the settlements is wearing thin. The Palestinians are making suspension of building a prerequisite for negotiations, a position which has international support. Netanyahu's efforts to blame Abbas for the absence of peace talks is received with skepticism in light of the settlement building.

Netanyahu is now calling for a new arms race in response to the revolution in Egypt. ("The defense budget will grow," as he told the cabinet yesterday. )

Instead of fanning the flames in the region and further heightening Israel's isolation he should work to defuse tension, to listen to the international community and to present a practical program for ending the occupation and the conflict.

Instead of acceding to the demands of right-wing cabinet members and approving major building plans in the West Bank, he should recognize the diplomatic damage that the settlements cause Israel, and renew the construction moratorium.

That would be Israel's contribution to shaping the new reality in the region and preserving the status of the United States, which was injured by Friday's veto in the Security Council.