While the world’s attention is focused on Iraq, other problems in the Middle East don’t just go away. Yesterday came two ominous signs of a worsening in the Israeli-Palestinian conflict.

First was the announcement that Israeli prime minister Ehud Olmert is expanding his coalition to take in the Yisrael Beiteinu party. Led by Avigdor Lieberman, Yisrael Beiteinu did surprisingly well in last March’s election, winning 9% of the vote and 11 seats in the Knesset.

Its main appeal is to Russian immigrants, but its distinctive policy is a hard line on the West Bank settlements: Lieberman resigned from Likud back in 1999 because he felt Benjamin Netanyahu was giving too much ground to the Palestinians. He has also called for the trial and execution of Israelis who negotiate with Hamas.

The coalition agreement bolsters Olmert’s numbers, but at the cost of further eroding the credibility of his commitment to peace, and also straining relations with his other major partner, the Labour Party. One Labour minister, Ophir Paz-Pines, ridiculed the move to make Lieberman minister for strategic affairs: “Lieberman is himself a strategic threat”.

It looks as if Olmert is either confident that Labour will toe the line, or expects them to walk eventually anyway and is therefore increasing his options on the right — which could ultimately lead to a rapprochement with Likud.

Then overnight came a report by Israeli daily Haaretz that a secret Israeli defence department investigation has revealed massive expansion of the West Bank settlements.

The international community regards all of the settlements as illegal, but some are more illegal than others: the Haaretz report concerns “unauthorised” settlement construction, which is illegal under Israeli law and which the Olmert government has repeatedly promised to halt.

According to Haaretz, “the defence establishment preferred not to know what was going on”, and “a number of key officials in the Civil Administration [had been] actively deleting information from the data base out of ideological allegiance with the settlers.”

The bigger the settlements, the more traumatic a peace deal is going to be, and the bigger the constituency in Israel that will fight tooth and nail against it. And, of course, the more the extremists on the other side will feel themselves vindicated. Iraq isn’t the only place where the future looks gloomy.