This article was originally published by CNN and is republished with permission.

A view of Israel's separation wall that separates occupied East Jerusalem from the occupied West Bank. (Magnus Johansson, Maan Images)

Secretary of State Hillary Clinton's Monday speech to America's leading pro-Israel lobby took on added significance in light of the spat between the U.S. and Israel over the expansion of Jewish settlements in occupied East Jerusalem.

It indicated the Obama administration blinked in the face of continued Israeli defiance, but that Israel likely faces more trouble down the road.

The row began when Israel announced 1,600 new Jewish-only homes on occupied Palestinian land on March 9, the very day Vice President Joe Biden was in the country to launch indirect talks between Israel and the Palestinian Authority.

In an angry phone call to Israeli Prime Minister Benjamin Netanyahu, Clinton reportedly demanded that Israel rescind the decision, among other "confidence-building measures," to get the U.S.-brokered talks back on track.

At AIPAC, the American Israel Public Affairs Committee, Clinton stood by the administration's criticism but could not point to any substantive Israeli concessions.

Netanyahu, she said, had responded to her demand for concrete steps with specific actions Israel is prepared to take. But halting settlement expansion was not one of them. Indeed, before leaving Israel for Washington where he was scheduled to meet President Obama on Tuesday, Netanyahu stressed that construction anywhere in Jerusalem was the same as construction in Tel Aviv and would continue as normal.

This is a replay of the administration's earlier cave-in. Almost a year ago, Obama sought to correct America's long-standing, pro-Israel tilt by demanding Israel stop building West Bank settlements, which have consumed much of the land on which a Palestinian state was supposed to be established.

But bowing to pressure from Israel's powerful U.S. lobby, the administration dropped the demand. Israel announced a fictional 10-month settlement freeze, excluding Jerusalem. Then Obama pressured Palestinians to return to the same merry-go-round of endless talks -- and still, Israel pursues settlements unrestrained.

In unusually stark language, Clinton warned that Israel needed a peace deal because "the status quo is unsustainable for all sides."

She pointed to the "inexorable mathematics of demography," a reference to projections that Palestinians will soon be the majority population in the area controlled by Israel. Only a two-state solution, Clinton asserted, could preserve Israel as a "Jewish and democratic state."

The problem is that the administration's plan to get to its objective of "two states for two peoples living side by side in peace" looks less credible today than ever.

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On the Palestinian side, the U.S. refuses to engage with Hamas, without which no credible deal can be struck, and the anemic U.S. vision of a Palestinian mini-state cannot hope to meet the aspirations or restore the rights of millions of Palestinian refugees.

And, after two embarrassing defeats at the Israel lobby's hands, chances that Obama will use America's massive financial aid to Israel as leverage are close to nil, especially as midterm elections approach.

The administration's dependence on the goodwill of the lobby was highlighted by the fact that AIPAC's new president, Lee Rosenberg, was a key member of the national finance committee for Obama's presidential campaign, and another AIPAC national board member, J.B. Pritzker -- who got a shout-out in Clinton's speech -- was national finance chair of Citizens for Hillary.

In the closely watched race for Obama's former Illinois Senate seat, the National Republican Senatorial Committee accused Republican Mark Kirk's Democratic opponent Alexi Giannoulias -- and by extension Obama, who is a close Giannoulias friend -- of being "anti-Israel." This may foreshadow a national GOP strategy to make unconditional support for Israeli policies more than ever a litmus test in American elections.

In this poisonous atmosphere, real progress is unlikely -- the best the Obama administration can hope for is to avoid a serious blowup until it can pass the problem to the next administration.

But the situation on the ground will not wait for the United States to come to its senses; in Jerusalem and the West Bank, popular resistance is growing, in the form of nonviolent protests, to Israel's land confiscations.

Israel's violent response, including the arrests of civil society leaders, may cause some Palestinians to react in kind.

Globally, Israel faces a growing campaign of boycott, divestment and sanctions just like apartheid South Africa did in the 1980s. A leading Israeli think tank, the Reut Institute, warned the government recently that this campaign "possesses strategic significance, and may develop into a comprehensive existential threat within a few years."

It also stated that a "harbinger of such a threat would be the collapse of the two-state solution as an agreed framework for resolving the Israeli-Palestinian conflict, and the coalescence behind a 'one-state solution' as a new alternative framework." With its aggressive settlement expansion plans, Israel has in effect chosen a one-state instead of a two-state solution -- but it is indeed an apartheid state.

While the United States looks on impassively, or continues to tout a charade of a peace process, Palestinians, pro-democracy Israelis and their allies will intensify what is rapidly turning into a struggle for equal rights and citizenship for everyone who inhabits the narrow land between the Jordan River and the Mediterranean Sea.