The Obama administration has protested against the Jerusalem Municipality's decision to license construction of 20 housing units for Jews on the site of the old Shepherd Hotel in the Sheikh Jarrah neighborhood of East Jerusalem. The US views construction of neighborhoods for Jews in the Arab areas of East Jerusalem the same way it views outpost construction in the West Bank, and opposes both. Prime Minister Binyamin Netanyahu has rejected the American protests very publicly, stating that Jerusalem is Israel's capital and not a settlement. By diverting the settlement construction issue to Jerusalem, Netanyahu, exploiting the American protest, hopes to rally Israeli and world Jewish opinion behind him and against Obama administration pressures concerning settlements in general.

