Israel’s announcement that it will build 1,300 units of housing in a contested sector of Jerusalem has touched off yet another crisis in U.S.-Israeli relations. But the hot topic of Israeli conversation is neither the stalled peace process nor the expanding settlements but Pamela Anderson—the semi-clad celebrity who has been sashaying across an Israeli stage and television sets in her own inimitable version of Dancing with the Stars. While President Barack Obama fumed in Indonesia, calling Israel’s latest action unhelpful to peace, Israelis yawned.

Many Israelis, even many in the peace camp, have all but given up on efforts to revive the on-again, mostly off-again “peace process” that has limped along for the past 17 years. The time has come, they and their American supporters say, to acknowledge that the effort has failed and to search for strategic alternatives—a “Plan B,” as John Bolton, President Bush’s former ambassador to the United Nations, recently wrote in the Wall Street Journal. “The patient died a long time ago,” Johns Hopkins University’s Fouad Ajami said of the peace process. “We’re just finally getting around to officially declaring him dead.”

For his part, Saeb Erekat, the chief Palestinian negotiator, raised the stakes when he urged nations to oppose Israel’s plans to construct more units in east Jerusalem by immediately recognizing a Palestinian state. Israel’s latest housing plans, he added, indicated that Prime Minister Benjamin Netanyahu’s coalition government wanted “settlements more than peace.”

Israel had never agreed to limit building “in any way in Jerusalem,” the government spokesman snapped back. “Jerusalem is not a settlement: Jerusalem is the capital of the State of Israel.” The government also challenged Washington’s assertion that continued building in Jerusalem was “counterproductive” to its efforts to revive direct talks. Egypt and Jordan both signed treaties with Israel while a succession of Israeli governments were building housing in Israel’s capital, the spokesman said.

In fact, Israelis and Palestinians appear fed up with the fruitless search for a diplomatic resolution of the 62-year-old conflict. Palestinians have been voting with their feet—leaving the West Bank or concentrating on business and feeding their families. As for Israelis, polls show that while a majority see their own government as corrupt, they also increasingly see Palestinians as an implacable foe unwilling to accept a Jewish state in their midst. Israelis also now see little harm in adopting a recalcitrant stance. Their economy remains strong despite recession in much of the Western world. Obama is perceived as weak, especially after his party’s midterm election losses. Suicide bombings and terror have largely stopped. Hamas seems mired in Gaza, and the Palestinian economy on the West Bank is generating far more growth and employment than it once did. “There is simply no pressure to lure Israel back into a process in which Israelis have lost faith,” says Smadar Perry, a veteran correspondent for Tel Aviv–based Yedioth Ahronoth who has covered Israel’s cold peace with Egypt and Jordan for years.

Mahmoud Abbas, the PA’s elected president, has said that Obama’s insistence on the settlement freeze has left him with little choice but to follow suit. How can he be less Palestinian than Obama? Israelis, on the other hand, see settlements as a pretext to avoid direct negotiations and a solution to the conflict. Palestinians, a senior Israeli official told a recent scholarly gathering, see the peace process as a way “of collecting Israeli IOUs and buying time until conditions on the ground are less favorable to Israel.” Memories of the Holocaust seem destined to fade; America may not always be as militarily dominant or politically supportive of Israel; and Arabs may not always be as divided as they have been and remain today, the official says. The suspicion that Palestinians will never accept a Jewish state partly accounts for Israel’s fury over the Palestine Authority–endorsed campaign to delegitimize the state of Israel—a semi-systematic attempt to turn Israel into the Middle East’s apartheid-era South Africa.

“Abu Mazen does not want to accept Israeli’s right to exist,” the official said, using the alternate name for Abbas. Hence, he added, the conflict was not really about 1967—the year in which Israel captured Jerusalem and other territory in the Six Day War—but “about ’48,” when the state of Israel itself was founded. “Palestine is like a groom who never manages to marry,” the official said. “Eventually, you have to wonder whether he really wants a bride.”

Many in Netanyahu’s fragile coalition have also concluded that most Palestinian leaders no longer believe in the two-state solution that Netanyahu endorsed last year with conditions and under American pressure. Increasingly, several of the prime minister’s close aides are said to believe, some Palestinian leaders are reverting to the promotion of a “one-state solution,” in which Israeli Jews would eventually be outnumbered and outvoted by what is currently an Arab minority. “This may be intended as a threat as well as an option,” the official said. “But the idea will never fly with Israelis.”

While Obama seems committed to pursuing the peace process, Israelis—some close to Netanyahu, some not—have begun floating alternatives: reviving multilateral meetings at the regional level; the declaration of a Palestinian state with less than full sovereignty or with transitional borders; or persuading Obama to focus on curbing Iran’s nuclear-enrichment program and alleged pursuit of atomic weapons first, and on the Arab-Israeli conflict afterward. Palestinians, too, have been flirting with alternatives. In an interview with Foreign Policy, Hanan Ashrawi, a member of the Palestine Liberation Organization’s executive committee, discussed several “out-of-the-box” options for fulfilling Palestinians’ desire for an independent state: persuading the UN to take over Palestinian territory now held by Israel in a trusteeship; getting the UN General Assembly to pass a resolution that would recognize the creation of a Palestinian state within the 1967 borders; or challenging Israel in the International Court of Justice or through the International Criminal Court. But one way or another, she said, “the encroachment on Palestinian land and rights has to end.”

Daniel Kurtzer, a former American ambassador to Israel, dismisses these options. “There are now so many bad ideas floating around that there’s not enough Raid in the world to spray them all dead,” he complains. Kurtzer says that he has still not given up on either a two-state solution or the peace process itself. Disputing Israeli suspicions that the Palestinians are no longer committed to peace, he argues that Abbas and Palestinian prime minister Salam Fayyad have done much of what Israel and the U.S. have pressed them to do—be it reforming the PA’s security establishment and working with Israel to stop terror on the West Bank or working “from the ground up” to strengthen the rule of law and nurture civic institutions, growth, and development. “I give this leadership high marks,” he says.

And where does Netanyahu stand on all this? Some Israeli analysts argue that by taking a hard line on settlements in Jerusalem (and on the possible use of force against Iran), he is seeking political cover for eventual compromise with the Palestinians. Others doubt that the Israeli leader has either the desire or the stomach for such a fight. One Israeli analyst who knows Netanyahu well insists, surprisingly, that he is determined to resuscitate the peace talks, though the move risks fracturing his ruling coalition. “It runs against his history, his family, his ideology, his party, his coalition,” the analyst told me. “But Bibi has embraced the idea of two states for two peoples. And he understands the consequences for Israel of failing to achieve that goal. He wants to do this.” But, the analyst concludes, “I’m not sure he’s found a way to do it.”

But even if Netanyahu’s motives are less pure—that is, if he sees the peace process primarily as a way of testing Palestinians’ willingness to make a deal—there seems little to lose by reengaging. If Israeli hard-liners are right, Israel will not be making any coalition-breaking concessions anytime soon.


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