London became the venue this week for discussions between the Israeli and American leaderships over a new co-ordinated policy towards Iran and the Palestinians.

A team headed by Intelligence Services Minister Dan Meridor has been meeting a White House team to discuss President Barack Obama’s plans to talk to Iran about its nuclear programme.

The Israelis hope to receive a definite time limit to American talks.

The American representatives were interested in hearing what measures Mr Netanyahu is planning to take to curb settlement activity in the West Bank. According to Israeli officials, Mr Meridor offered a removal of settler outposts.

Israeli Prime Minister Binyamin Netanyahu this week effectively accepted the link Mr Obama made in their meeting in Washington between curbing settlements and the campaign against the Iranian nuclear programme.

In a meeting of the Likud Knesset faction on Monday, Mr Netanyahu justified the evacuation orders issued by the Defence Minister this week to 10 settler outposts, built on privately-owned land in the West Bank.

“These are not normal times,” he told an audience that included leaders of the settler movement.

“The danger is growing and charging at us. My job is first of all to ensure the future of the state of Israel and we have to arrange our priorities accordingly. There are important reasons for keeping our good relations with the United States.”

The evacuation of outposts began last Thursday with the demolition of five buildings in Maoz Esther, a small outpost 10 miles north of Jerusalem. Some of Likud’s cabinet ministers attacked Labour’s Defence Minister, Ehud Barak, for ordering the removal of Maoz Esther, claiming he was “acting according to his own political agenda”, but Mr Netanyahu made it clear this week that the order had been coordinated with him.

An advisor to Mr Netanyahu explained that “it is clear that Obama wants to show that he has forced Israel to make concessions over the settlements before his big speech to the Arab world next week in Cairo. We don’t like it but what is most important for us is to continue cooperating with the administration on blocking the Iranians.”

The fact that the talks are being held less than a week after Mr Netanyahu left Washington, in advance of Mr Obama’s speech in Cairo, and in London, halfway between the two capitals, is a signal of the urgency both governments feel over the Iranian issue.

It is also significant that Mr Netanyahu chose the more left-leaning Meridor to lead the team, which includes his National Security Advisor Uzi Arad and his personal emissary Yitzhak Molcho.

Israel is trying to convince the new administration to agree its continuing building in established West Bank settlements for purposes of “natural growth”. The Bush administration did not oppose this, but so far the signals received from Mr Obama’s aides have been, according to Israeli officials, “not encouraging”.

Meanwhile there is another source of contention between the two governments.

After Mr Netanyahu said last week at a Jerusalem Day ceremony that Israel’s capital “would never again be divided”, a State Department spokesman in Washington emphasised that “Jerusalem is a final status issue. Israel and the Palestinians have agreed to resolve its status during negotiations. We will support their efforts to reach agreements on all final status issues.”

Israeli officials sought to downplay the remark. A senior diplomat said, “this has always been the standard US position. That doesn’t mean that Jerusalem is suddenly on the agenda.”