Obama's dangerous new lurch into anti-Israel populism changes global politics in extremely dangerous ways, and poses a challenge for Kevin Rudd.

Perhaps Obama's most distinctive contribution to the foreign policy debate in the lead-up to the US presidential election was his avowed determination to talk to and engage the US's enemies if he became president. He was happy in principle to talk to Iran's Mahmoud Ahmadinejad, but did not know for sure that the Iranian president wielded real power. But he sent all manner of felicitations and greetings to Iran and its government. When that government stole an election on Ahmadinejad's behalf and viciously brutalised its citizens, Obama refrained from speaking too much or too forcefully, as, he said, he didn't want to be seen to be interfering in Iranian internal affairs.

When Obama met the king of Saudi Arabia, a nation in which no one votes, women are subject to severe and demeaning restrictions and it is against the law to have a Christian church, Obama bowed in deep respect.

When Obama ran into Venezuela's murderous despot, Hugo Chavez, at a summit, there was a friendly greeting observed by all.

But there is one leader whom Obama draws the line at. He will not be seen in public with Israel's Prime Minister, Benjamin Netanyahu. Astonishingly, when Netanyahu saw Obama at the White House this week, all photographers and all TV cameras were banned, a level of humiliation almost completely unique in modern White House practice.

You might even conclude that Obama is trying to interfere in internal Israeli politics and bring down a government. This is something post-colonial, post-multicultural Obama would never do with Iran, but with Israel, the US's longstanding ally, it's fine.

And what was Netanyahu's crime, this act of infamy that Obama's senior staff described as an "affront" to America? It was that the relevant housing authority passed another stage of approval for 1600 Israeli housing units to be built in East Jerusalem in about three years' time. It was very foolish that the Israelis allowed this announcement to take place while US Vice-President Joe Biden was in Israel. But they apologised to Biden at the time, Biden kissed and made up with the Israelis and was back to delivering fulsome pro-Israel speeches before he left.

After that point, though, the US reaction went into overdrive. Impeccable American sources tell me this reaction was driven by Obama, and to a lesser extent the Chicago mafia around him.

We must ask why this is so, but first let's get Netanyahu's infamous crime into perspective.

Last November Netanyahu announced a 10-month moratorium on all building activity in Jewish settlements in the West Bank. Israel has already promised not to take any more land for settlements but there is the question of renovating existing buildings and constructing new ones in existing settlements.

As Hillary Clinton acknowledged in her speech this week to the American Israel Public Affairs Committee, East Jerusalem was never part of this agreement. The two main peace offers Israel has made to the Palestinians in recent years were the Camp David/Taba proposals and the accompanying Clinton parameters in 2000, and Ehud Olmert's offer to Palestinian president Mahmoud Abbas in 2008. Both plans offered essentially the same formula. The Palestinians get all of the Gaza Strip, about 95 per cent of the West Bank and a compensating parcel of territory from Israel proper to make up for the small amount of territory in the West Bank that Israel would keep which houses the main Jewish population blocks. The Palestinians also get some parts of East Jerusalem as their capital. This principle of territorial swaps was accepted by Yasser Arafat and Abbas.

East Jerusalem has always had a different status from the West Bank and some Israelis certainly don't want to give any of it to a new Palestinian state. But everyone accepts that some Jewish neighbourhoods would remain part of Israel. These are mostly neighbourhoods, as Netanyahu pointed out this week, which are five minutes from the Knesset and a couple of blocks beyond the 1949 armistice line. The administration of George W. Bush had formally agreed with the Israelis that these areas would be permanently part of Israel. Bill Clinton had negotiated an offer to the Palestinians in 2000 which accepted this.

It would be a radical change of policy for an Israeli government to decree that no building would ever take place in Jewish areas of Jerusalem. It would also be a change of American policy.

Moreover, no serious analyst could believe that such building is a roadblock to peace. Peace negotiations have gone on with such building taking place in the past. And all the things that truly make peace impossible - Arab and Palestinian refusal to accept the legitimacy of any Jewish state, Palestinian insistence on certain deal breakers such as the right of return of all Palestinian refugees and their descendants to Israel proper, the insistent and violent anti-Semitism of Palestinian and Arab propaganda and the regional ambitions of players such as Iran and Syria - will be completely unaffected by any decision to build apartments in a Jewish neighbourhood in East Jerusalem in three years time. So why has Obama gone into full jihad mode against Israel? Three explanations suggest themselves. Obama has had a terrible year in foreign policy. He has achieved nothing on Iran or China or anything else of consequence. He is too smart to believe this intimidation of Israel will advance peace, but it might get peace talks going again. The Palestinians only made settlements a roadblock after Obama did. They are refusing to join Israel in peace talks, which Netanyahu would be happy to participate in. They have said they might engage in proximity talks - which means not talking to the Israelis directly but to mediators who will shuttle back and forth carrying messages between them and the Israelis. This is primitive and ridiculous stuff, but if such talks get going Obama could claim some kind of victory, or at least progress.

And Obama is showing that his personal popularity, not America's standing, still less matters of substance such as Iran's nuclear program, is what motivates him.

This leads to the second explanation of his behaviour, and that is to make himself personally popular in the Muslim world. Beating up on Israel is the cheapest trick in the book on that score and it can earn him easy, worthless and no doubt temporary plaudits in some parts of the Muslim world.

And thirdly, Obama is the first post-multicultural president of America. In his autobiography he talks of seeking out the most radical political theorists he could at university. For these people Israel is an exercise in Western neo-imperialism. Obama makes their hearts sing with this anti-Israel jihad.

Accompanying Obama's own actions has been some of the most dangerous rhetoric ever to come out of a US administration, to the effect that Israeli intransigence endangers US troops by inflaming extremists in the Islamic world. No serious analyst anywhere believes that Israel is an important source of the conflicts in Afghanistan or Iraq. Using this type of argument comes dangerously close to the administration licensing a mutant strain of anti-Semitism - it's all the Jews' fault. Why is all this a challenge for Rudd?

The anti-Israel hysteria is totally disproportionate and wildly over the top. The British decision to expel an Israeli diplomat because Israel is alleged to have used forged British passports in a Mossad operation is a case in point.

The British precedent pressures Rudd to do the same. Rudd should resist this pressure, as Opposition leader Tony Abbott has urged him to. 2010 is a critical year for the Middle East. Israel's friends now should rally round it, or the spectre of wild and hysterical anti-Israel sentiment will be unleashed with all manner of destructive consequences.

Now is the time for anyone who cares about Middle East peace, or who claims as Rudd does to care about Israel, to stick close to Jerusalem. The Australian Federal Police inquiry will not be conclusive about whether Israel used Australian passports or not. Obama wants to be popular. Gordon Brown wants Muslim votes and to distract attention from the latest scandals of his government. Rudd could be tempted to bash Israel as a way of courting Arab League votes at the UN. But the path of statesmanship here does not lie in apeing these foolish American and British moves.

There would also be a gruesome comparison in the way Australia responds to big as to small nations. China imprisons one of our citizens, denies consular access to most of the trial and treats Canberra with contempt. In return Rudd changes policy and declines to see the Dalai Lama and similarly declines to send an Australian minister to Taiwan in the entire course of the government's parliamentary term.

Yet Israel, our close friend, is alleged to misuse a passport and then gets the very big diplomatic penalty of having a diplomat expelled. It would be disproportionate and foolish and cowardly.

The Americans and Brits don't always get things right. There are times when Canberra should definitely not follow their lead.