Israel's prime minister Binyamin Netanyahu gave the most concessionary speech ever heard from a leader of Likud to the joint houses of the United States Congress on Tuesday in Washington.

However, reactions to his admission, that in a peace solution "some" Jewish settlements in the West Bank would remain outside Israel's borders, indicate that Mr Netanyahu's speech did not go any way towards to extricating the diplomatic process from its quagmire.

The speech to Congress was the culmination of a series of speeches by the two leaders, beginning with Mr Netanyahu's address to the Knesset last week, followed by two speeches by Mr Obama, at the State Department last week and on Sunday at the annual convention of the pro-Israel lobby AIPAC. Mr Netanyahu spoke at the AIPAC convention on Monday.

In Congress, Mr Netanyahu was greeted with rapturous applause by the senators and representatives. He combined steadfast commitments to security arrangements - a "united Jersualem" as Israel's capital, a refusal to retreat to the "indefensible" pre-1967 borders and a denial of any return of Palestinian refugees to the Jewish state - with the kind of words that he rarely, if ever, used before.

"I am willing to make painful compromises to achieve this historical peace," he said.

While rejecting the 1967 borders, Mr Netanyahu said that "Israel will be generous on the size of a Palestinian state, but will be very firm on where we put the border with it."

Perhaps the most significant part of the speech, certainly from an internal Israeli political perspective, was when Mr Netanyahu said that the issue of Jerusalem could be "creatively" solved and that it was clear that following a peace agreement, "some settlements" would not be within Israel's borders.

The issue of Israel's future borders was the central bone of contention between the two administrations.

Israeli diplomats claimed that they had received assurances, ahead of Mr Obama's State Department speech last Thursday, that he would only refer to the Israel-Palestine conflict in a small section of the address, which would deal mainly with the revolutions in Arab countries. They also said that he would not mention the 1967 borders as a base for the future borders between Israel and the Palestinian state.

Instead, Mr Obama spoke at length on the conflict and did bring up 1967. The result was almost open conflict between the Netanyahu government and the White House, with Mr Netanyahu replying that the 1967 borders were "indefensible". The blunt exchange was followed by a frosty meeting between the two leaders the next day.

The tension thawed over the next few days, with the President giving a very different speech, at least in tone, at AIPAC, and clarifying the 1967 remarks with the assurances that there would also be "land swaps" that would take into account demographic changes on the ground.

Mr Netanyahu's speech won over Congress, but this was friendly audience to begin with. The White House's response was more lukewarm, with a spokesman saying that they were satisfied with Mr Netanyahu's commitment to peace. Senior Israeli officials admitted, however, that relations between the two leaders are still tense.

Flying home, the Prime Minister could look forward to more criticism. First it came from the right wing of his own party. Likud MK Dani Dannon said that following the speech "the Prime Minister will find that most of the Likud is not with him".

The head of the Yesha settlers' council, Naftali Benet, said: "It is a waste of time to talk about a Palestinian state, it will never happen."

The leaders of Kadima were also dismissive of the speech, despite the fact that its contents accord with their manifesto. "Speeches are not policy," said senior MK Shaul Mofaz, "Netanyahu is leading us nowhere and we need elections to prevent the confrontation that he is forcing us into."

The Prime Minister's aides were unfazed. "We gained everything we sought to accomplish," said one. "We got the administration's commitment to oppose a unilateral recognition of Palestinian statehood, we underlined that support for Israel in Congress is as strong as ever and we showed up Kadima's hypocrisy. They should be joining the coalition now, not attacking Bibi."

The Palestinians were the least impressed. "There was nothing new in the speech, except for more obstacles for the peace process," said Nabil Abu Rudeineh, President Mahmoud Abbas's spokesman.