Mr Obama's 90-day gambit amounts to a final roll of the dice on Oslo and the idea that Israelis and Palestinians can reach consensus at the negotiating table.
Obama sets the Oslo clock ticking with his latest offer
After all, standing UN Security Council resolutions deem all Israeli settlement outside of its 1967 borders illegal, and the Israelis committed themselves eight years ago to President George W Bush's peace "roadmap", which demanded a complete freeze on settlement activity. "But now," says the former US ambassador to Israel, Dan Kurtzer, "the administration says it is prepared to pay off Israel to freeze only some of its settlement activity, and only temporarily. For the first time in memory, the United States is poised to reward Israel for its bad behaviour."
Mr Kurtzer, writing in the Washington Post, warns that the US is getting precious little in return - a non renewable three-month resumption of a moratorium on building homes in West Bank settlements, which also exempts Israeli construction in East Jerusalem, which is just as likely to undermine peace talks.
The administration's logic is simple: within three months, Prime Minister Benjamin Netanyahu and President Mahmoud Abbas will agree on where to draw the border between Israel and a Palestinian state, rendering moot the question of freezing settlements - Israel will continue to build on land that will fall on its side of the agreed border, and it will have to give up those settlements that fall on the Palestinian side. Agreement would also give the Israelis and Palestinians a platform for tackling other vexed issues such as Jerusalem and refugees.
Nothing we've seen so far, however, offers any sign that Mr Abbas and Mr Netanyahu will agree on the borders of a Palestinian state within three months. No Palestinian leader can settle for less than a state based on the 1967 borders with East Jerusalem as its capital, and that's not what Mr Netanyahu has in mind. Jerusalem can't be separated from the discussion of borders because the Palestinians insist that a border would have to run through Jerusalem, while the Israelis refuse to even discuss relinquishing their occupation of those parts of the city captured in 1967 and which they insist they intend to keep.
So, the furore over the settlement freeze that has taken up the first 18 months of Mr Obama's peace effort is a reminder that Israel and the Palestinian leadership are not engaging each other as partners; each is simply trying to stay onside with the Americans.
Mr Obama's 90-day gambit, then, amounts to a final roll of the dice on Oslo and the idea that Israelis and Palestinians can reach consensus at the negotiating table. After three months, the Israelis won't be asked to extend their moratorium beyond that, and the Palestinians and their Arab backers won't be able to continue a process no closer to resolution today than it was 10 years ago.
In the face of Israeli intransigence on settlements, Palestinian officials have begun weighing the option of invoking international law and seeking adjudication of the conflict by the United Nations Security Council. It's hard to see how a politically embattled Mr Abbas has any incentive to settle for the limited offerings of Mr Netanyahu when the alternative is to seek redress in international forums where Israel is less decisive and Palestinian rights enjoy a recognition sometimes negated in Washington. The longstanding idea that only the US can deliver the Israelis also becomes unsustainable when Mr Netanyahu so clearly demonstrates that the opposite is true.
So, it's a safe bet that 90 days will pass without an agreement on borders. And at that point, it will be Mr Obama who will be forced to lay his own cards on the table. US interests throughout the region preclude him simply washing his hands of the matter. He could be tempted to follow his predecessor's example by trying to sustain the illusion that ongoing, open-ended talks are better than acknowledging that no progress is being made. But his own deadline has created a moment of truth that precludes that option: If Abbas and Netanyahu are unable to agree on borders 20 years after Israelis and Palestinians first began negotiating a two-state peace, bilateral talks will never produce an agreement on the terms of a deal.
The very idea that re-partitioning Palestine could be achieved through bilateral negotiations is of comparatively recent vintage, and after two decades it appears to have run its course. The first attempt at a two-state solution came in 1947, but nobody was naive enough to believe that it could be achieved by consensus. The UN set the terms, the Palestinians and their Arab backers rejected them, and Israel accepted them - but only as a starting point. Israel's battle plan in the war that followed demonstrated a clear intent to seize a far larger share of the territory (78 per cent) than was allocated to them by the partition plan (55 per cent). Then, in the war of 1967, the Israelis captured the rest, and began systematically settling the West Bank and East Jerusalem to the point that some 8 per cent of Israel's Jewish population now lives on occupied territory.
Although the Oslo process opened a window of opportunity for the two sides to agree on a new partition based on the 1967 borders, agreement has eluded them. What the expiry of Mr Obama's next deadline will reveal is that the two decades that followed Oslo have left the two sides no more capable of agreeing terms of partition now than in 1947.
If Mr Obama is prepared to deliver on US promises to Arab allies and answer the demand of his own generals to resolve the Israeli-Palestinian issue in the interests of US prospects throughout the Muslim world, further prevarication will no longer be sustainable. If 90 days pass without agreement, the question will be whether Mr Obama is prepared to work with international partners to impose the parameters of a two-state solution that the parties themselves are unable to agree on, no matter how much they're offered in cash and airplanes.
Tony Karon is a New York based analyst who blogs at tonykaron.com