Israeli Prime Minister Benjamin Netanyahu's political standing is perilous because of divisions within his coalition over efforts to pursue peace with the Palestinians, a senior U.S. official said on Friday.

Israel's announcement this week, during a visit by U.S. Vice President Joe Biden, of plans to build 1,600 settler homes in an area of the occupied West Bank it annexed to Jerusalem, cast a shadow over U.S. efforts to relaunch Middle East peacemaking.

The decision was a blow to Biden's mission and sent him and other top American officials scrambling to shore up Palestinian and Arab support for launching U.S.-led proximity talks as early as next week, although officials acknowledged there could be a further delay.

Secretary of State Hillary Clinton telephoned Netanyahu to tell him the settlements announcement was a deeply negative signal about Israel's approach to the bilateral relationship ... and had undermined trust and confidence in the peace process, a State Department spokesman said on Friday.

The Israelis know the only way to stay on the positive side of the ledger -- internationally and with us -- is to not have them recurring, the senior Obama administration official said of announcements about expanding settlements.

The official, speaking on condition of anonymity because of the sensitivity of the matter, predicted a dicey period here in the next couple days to a couple of weeks as Washington tries to get the indirect talks launched.

Entering negotiations with the Palestinians on so-called core issues including statehood borders and the fate of Jerusalem could spark a revolt from Netanyahu's far-right coalition partners and destabilize his government.

The senior administration official termed Netanyahu's political position as perilous because of the divisions. Right-wing parties oppose peace moves, including a full settlement freeze, sought by the Palestinians and the United States.

Palestinian President Mahmoud Abbas, who holds sway in the Israeli-occupied West Bank, has likewise been seriously weakened by his rivalry with Hamas Islamists, who control the Gaza Strip bordering Egypt.

The Obama administration believes the proximity talks may be the only way in the foreseeable future to ease Israel back to the negotiating table without triggering a political crisis.

Under the proposed format for the talks, Netanyahu could relay his positions on sensitive issues to a U.S. mediator, George Mitchell, instead of to the Palestinians directly.

But Israeli officials say Netanyahu is resisting the inclusion of core issues in the proximity phase, casting doubt on the scope of the talks.

The senior official said Netanyahu's assurances the 1,600 houses would not be built for at least a year were meant to give Abbas the political cover he needed to move forward as planned.

Nothing is going to go up anytime soon, this was a year away at a minimum, which is another way of saying, 'Hey look, I'm not building anything. Nothing's going to be built here,' the official said of the private messages relayed to Abbas by the vice president.

By vouching for Netanyahu, Abbas was able to say with certainty to his team, 'Look, this is a fight about something in the future and the way to deal with that is to get into talks,' the official said.

(Editing by Peter Cooney)

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