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The hard right Mr Lieberman ordered the circulation to Israeli embassies of copies of the notorious wartime photograph of Hitler meeting the then Mufti of Jerusalem, an overt sympathiser with the Nazis who helped them raise an SS division in Bosnia. The move has alarmed some experienced Israeli diplomats who believe it will be counterproductive. It came after the US State Department expressed its disapproval to Michael Oren, the Israeli ambassador in Washington, over plans to build at least 20 apartments for Jewish settlers at the site of the old Shepherd's Hotel building in the inner East Jerusalem district of Sheikh Jarrah.

The building was once used as a headquarters of the Mufti, a member of the one of the most prominent Palestinian families in Jerusalem. The Palestinian nationalist Faisal al-Husseini, grand nephew of the Mufti, was a frequent interlocutor and strong advocate of peace moves with Israel in his later years until his death in 2001.