In his 45-minute speech on the Middle East Thursday, President Obama spoke of his admiration for the wave of protests movements rocking the region, attempting to square U.S. interests with the democratic aspirations of an increasingly restive Arab street. He also announced several incremental shifts in U.S. policy on the Israel-Palestinian conflict.

"The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps," the U.S. president said, referring to what are official known as the 1949 Armistice lines, "so that secure and recognized borders are established for both states."

That's one step further the position outlined by Secretary of State Hillary Clinton in April at the U.S.-Islamic World Forum in Washington, when she called for such an outcome to be the product of negotiations: "We believe that through good-faith negotiations, the parties can mutually agree on an outcome which ends the conflict and reconciles the Palestinian goal of an independent and viable state based on the 1967 lines, with agreed swaps, and the Israeli goal of a Jewish state with secure and recognized borders that reflect subsequent developments and meet Israeli security requirements."

Former Congressman Robert Wexler, now the president of the S. Daniel Abraham Center for Middle East Peace, told The Cable that Obama's announcement was a bold step toward Middle East peace that alters U.S. policy in a fundamental way.

"The president put on record today that America's position that the conflict should be resolved on ‘67 lines with agreed swaps," Wexler said. "By doing so, he has ensured that Israel remains a Jewish and democratic state, and second, he has created a moment of truth for Prime Minister [Bibi] Netanyahu, President [Mahmoud] Abbas, and the Israeli and Palestinian peoples."

Wexler sees the move as a daring challenge to both Netanyahu and Abbas to restart the peace process based on the parameters Obama laid out in the speech, which included a clear rejection of Abbas's strategy of pursuing a resolution recognizing a Palestinian state at the U.N. General Assembly.

"No longer in earnest can Abbas call for a settlement freeze; no longer can Abbas say he pursuing a strategy at the U.N. to realize a Palestinian state," Wexler said. "Likewise, Netanyahu must determine whether or not he is willing to negotiate based on the 1967 lines with agreed territorial swaps and realize an outcome that brings 80 percent of Jewish Israelis who are today outside of the ‘67 lines within the internationally recognized borders of the state of Israel."

There was considerable debate inside the administration as to whether making such bold statements on the peace process was a good idea, but in the end, Obama made the call himself and did so because he thought such language was necessary to give credibility to his overall regional policy, according to Wexler.

"It certainly was a difficult decision, but ultimately the president determined that a call for reform in the Middle East and an American proscription for engagement with the Arab nations would seem hollow if [Obama] did not provide direction on the Israeli-Palestinian conflict as well," Wexler said.

There's also evidence that the decision went down to the wire. Obama was more than 25 minutes late to deliver his speech and White House aides told reporters the delay was due to last-minute edits. A text of the speech was emailed to reporters halfway through Obama's remarks, whereas usually the text is distributed as soon as a presidential speech begins.

The Israelis were surprised by the remarks as well. The Netanyahu government had been assured of no surprises in the speech, especially since Obama is set to meet with the prime minister in Washington Friday and address the policy conference of AIPAC, the pro-Israel lobbying group, on Sunday. Obama's remarks were not only a surprise, but "not a very good one," one Israeli official said.

Netanyahu's office reacted immediately after the speech, writing on his official website:

Israel appreciates President Obama's commitment to peace.  Israel believes that for peace to endure between Israelis and Palestinians, the viability of a Palestinian state cannot come at the expense of the viability of the one and only Jewish state. That is why Prime Minister Netanyahu expects to hear a reaffirmation from President Obama of U.S. commitments made to Israel in 2004, which were overwhelmingly supported by both Houses of Congress. 

Among other things, those commitments relate to Israel not having to withdraw to the 1967 lines which are both indefensible and which would leave major Israeli population centers in Judea and Samaria beyond those lines. Those commitments also ensure Israel's well-being as a Jewish state by making clear that Palestinian refugees will settle in a future Palestinian state rather than in Israel. Without a solution to the Palestinian refugee problem outside the borders of Israel, no territorial concession will bring peace.

Some of Israel's supporters saw the remarks as unhelpful.

"Mentioning the ‘67 borders in this way, at this time, is a major mistake that simply repeats the error made when the White House focused on settlements and drove the Palestinians to an untenable position from which they will not climb down," said Josh Block, former spokesman for AIPAC, now a fellow at the Progressive Policy Institute. "This strategic error is manifold, and undermines, not advances, the prospects for peace talks."

The other shift in Obama's position on the Israeli-Palestinian conflict was that he called for the issues of territory and security to be dealt with first before issues such as the status of Jerusalem and the right of return for Palestinian refugees are tackled.

"Two wrenching and emotional issues remain: the future of Jerusalem, and the fate of Palestinian refugees. But moving forward now on the basis of territory and security provides a foundation to resolve those two issues in a way that is just and fair, and that respects the rights and aspirations of Israelis and Palestinians," Obama said. "Recognizing that negotiations need to begin with the issues of territory and security does not mean that it will be easy to come back to the table."

"The president outlined a process in which Israel's security will be guaranteed, its Jewishness will be without question, and the withdrawal of Israeli security forces will be phased and conditioned on the behavior of the Palestinians. If the Palestinians do not perform, the Israelis won't have to withdraw from security points," said Wexler. "Today, the president made that the official U.S. position."

Block argued that while it's true Obama's scheme does acknowledge that Israel should retain control over large parts of the West Bank, to push this idea now, just as the Palestinian Authority and Hamas are forming a unity government, is unwise.

Obama addressed that issue in his speech by saying, "Palestinian leaders will not achieve peace or prosperity if Hamas insists on a path of terror and rejection. And Palestinians will never realize their independence by denying the right of Israel to exist."

"There's no good answer to the question of what to do about Hamas," said Wexler. "But Obama put the onus on the Palestinians to provide an answer."