WASHINGTON, April 12 (Bernd Debusmann/Reuters) - In June 1980, when an American president, Jimmy Carter, objected to Jewish settlements in Israeli-occupied territories, the Israeli government responded by announcing plans for new settlements. At the time, settlers numbered fewer than 50,000.

In 2010, another American president, Barack Obama, is calling for an end to settlements he considers obstacles to peace between Israel and the Palestinians. Israeli authorities responded by announcing new ones, illegal under international law. Settlers now number close to half a million.

In the three decades between 1980 and 2010, there have been multiple US-Israeli spats over the issue and they often fell into something of a pattern, spelled out in 1991 by James Baker, President George H W Bush's secretary of state: Every time I have gone to Israel in connection with the peace process ... I have been met with an announcement of new settlement activities. It substantially weakens our hand in trying to bring about a peace process. That is as true now as it was then.

Also part of the routine: suggestions from critics of Israeli policy that the United States uses its vast aid program to Israel as a lever to change its behavior. Cut off the Cash and Israel Might Behave said a headline at the height of the latest US-Israeli spat over settlements. The headline ran over an essay in a British newspaper, The Independent, by Avi Shlaim, a professor of international relations at the University of Oxford who served in the Israeli army.

The folder in which to file that idea might be labeled Wishful Thinking.

Since the end of the Second World War, Israel has been the largest cumulative recipient of US foreign aid, according to the Congressional Research Service, the research arm of Congress. Since 1985, aid to Israel has run at around $3 billion a year, a sizable sum for a country with a population roughly equal to that of New York City.

Attempts to use aid as a lever have been few and far between. In 1991, the elder Bush asked Congress to delay $10 billion in loan guarantees to get Israel to stop building new settlements. This sparked a determined lobbying effort by the American Israeli Political Action Committee, the biggest pro-Israel advocacy group, and prompted Bush to describe himself as one lonely guy facing powerful political forces in the shape of a thousand lobbyists on the Hill.

The quip illustrated both the limits of presidential power and solid congressional support for Israel. It runs across partisan divides and was highlighted once again during Israeli Prime Minister Benjamin Netanyahu's visit to Washington in March, when President Barack Obama made known his displeasure over yet more settlements by dispensing with standard protocol. No joint declaration, no dinner, no photo opportunity, exit through the back door.

NO SPACE BETWEEN US AND ISRAEL

That contrasted markedly with warm remarks from the Democratic House speaker, Nancy Pelosi, and the leader of the House Republicans, John Boehner. We in Congress stand by Israel. In Congress we speak with one voice on the subject of Israel, said Pelosi. We have no stronger ally anywhere in the world, said Boehner.

Vice President Joseph Biden, a staunch defender of Israel in his 36 years in the Senate, even after he was blindsided during a Jerusalem visit by an announcement of 1,600 new Jewish settlements, said there is no spaceabsolutely no space between the United States and Israel when it comes to security, none. No space.

Such joined-at-the-hip thinking is the reason why U.S. military aid to Israel has been designed to give the recipient a qualitative military edge (QME) over its potential adversaries. The QME dates back to President Lyndon Johnson and is not connected to the ups and downs of the relationship - a day after Netanyahu's tense meeting with Obama, the Pentagon announced an agreement to supply Israel with three new tactical transport aircraft, part of an order worth up to $1.9 billion.

Providing Israel with generous economic and military aid made sense, from an American point of view, during the Cold War when the Soviet Union was propping up its client states in the Middle East and the United States needed a reliably pro-American outpost. As the late Secretary of State Alexander Haig once put it: Israel is the largest, most battle-tested and cost-effective US aircraft carrier that cannot be sunk, does not carry even one US soldier, and is located in a most critical region for US national security. In short, a strategic asset.

Is it still? Or is lack of progress on making peace with the Palestinians turning Israel into a liability for its long-term benefactor. In March, in written testimony to the Senate Foreign Relations Committee, Central Command chief General David Petraeus, listed insufficient progress towards a comprehensive Middle East peace as number five on a list of 15 threats to US national security.

Petraeus, whose Central Command covers 20 countries in the Middle East and South and Central Asia, assigned no blame for the lack of progress but said the Israeli-Palestinian conflict fomented anti-American sentiment due to a perception of US favoritism to Israel. Al Qaeda and other militant groups, he said, exploited Arab anger over the Palestinian issue to mobilize support.

That places Israel and foot-dragging over settlements in the liability column of the ledger. But that won't affect continued US military aid. Under a ten-year agreement signed in 2007, military aid will reach $3.15 billion a year by 2013 and will stay at that level until 2018. Progress towards peace or not.