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Bad News for the Peace Process?

Just out from the White House:

Statement by the Press Secretary on Israeli Settlements
We regret the reports of Israel's plans to approve additional settlement construction.  Continued settlement activity is inconsistent with Israel's commitment under the Roadmap.
As the President has said before, the United States does not accept the legitimacy of continued settlement expansion and we urge that it stop.  We are working to create a climate in which negotiations can take place, and such actions make it harder to create such a climate.
We do appreciate Israel's stated intent to place limits on settlement activity and will continue to discuss this with the Israelis as these limitations are defined.
The U.S. commitment to Israel’s security is and will remain unshakeable.  We believe it can best be achieved through comprehensive peace in the region, including a two-state solution with a Palestinian state living side by side in peace with Israel.
That is the ultimate goal to which the President is deeply and personally committed.
Our objective remains to resume meaningful negotiations as soon as possible in pursuit of this goal.  We are working with all parties – Israelis, Palestinians, and Arab states -- on the steps they must take to achieve that objective.  

Backstory here.

There may be an element of kabuki at work, where Netanyahu snubbed the White House with a wink from George Mitchell and company, a way of resetting Obama's troubled relationship with Israel. If that's not the case, then Obama has now essentially been flipped off by both the Israelis and the Arabs, no?

Update: Ben Smith has good follow-up reporting to support the kabuki theory.