Alliance of fear makes progress possible towards solution to Middle East problem

In that sense, recent events - the victory of the radical Islamic movement Hamas in Gaza and Fatah's rapid collapse there - have focused the diplomatic mind, and shaken Israel, the United States and Sunni Arab states such as Egypt and Saudi Arabia, already nervous about a rising Iran.

In trying to gauge the seriousness of all the new talk about peace negotiations, and about where they might be headed, it seems important to keep the hangman in mind.

Martin S Indyk, a former Clinton administration official and ambassador to Israel, sees a new "alliance of fear" that makes progress possible. "Only when there is a sense of urgency can things get done," he said. "Otherwise the need for political survival trumps progress toward peace."

After seven years of violence, terrorism, stagnation and unilateralism, the US has finally decided to re-engage, pushing Israeli prime minister Ehud Olmert and Palestinian president Mahmoud Abbas to talk about peace.

Both Olmert and Abbas may be weak, but they are also both desperate for accomplishment. And the landscape is very different to what it was seven years ago.

All now seem to understand that what is at stake is the future of the two-state solution - of a negotiated territorial compromise between Israelis and Palestinians over the same slice of earth.

But hanging over that issue, of course, is the fallout from Iraq, and the larger regional challenge of Shi'ite Iran pursuing nuclear weapons and sponsoring the players most opposed to a permanent deal: Hamas and Islamic Jihad in the territories; and Hezbollah in southern Lebanon.

The Bush administration finally seems to understand that there is no sustainable status quo, said one US official.

Even more to the point, secretary of state Condoleezza Rice now seems to understand that "if there was an Archimedean point to the Middle East problem, it was to be found in the Palestinian issue, not the 'war on terror', Iraq or the need for Arab democracy", as former Israeli foreign minister Shlomo Ben-Ami put it.

However, unlike President Bill Clinton, whose team did not take or have the time to get Arab support for Yasser Arafat at Camp David, President Bush appears to have gained the support of Saudi Arabia, which is worried about Iran - thereby providing an Arab umbrella over Abbas and Palestinian prime minister Salam Fayyad.

But to do what, exactly? Indyk, at the Brookings Institution and thinking about the lessons of Camp David, warns against hubris. "If Rice goes for final status, she'll drive it into the ground," he said.

Israel does not have enough confidence in Abbas or a divided Palestinian polity to pull out of large sections of the West Bank, fearing Gaza-like chaos that could rain rockets on Ben Gurion airport.

What's needed is a parallel and simultaneous process of Palestinian state building and negotiations over a peace deal so that the rest of Bush's presidency is not wasted, said Indyk.

On this, Rice and special international envoy Tony Blair could work in tandem, with Blair helping the Palestinians to finally build the institutions of a state, while Rice pushes both sides to agree on what a peace deal would look like.

Rice speaks carefully about negotiations on the principles of a final settlement - not the final settlement itself, which will be carried out over many years. Ideally, some of those principles can be put into a text - not a peace treaty - that can be endorsed by an international meeting for which Rice will be host, probably in November.

Officials say an example could be an agreement in principle that Israel and the Palestinians accept 1967 boundaries with modifications and land swaps, which will give the new Palestinian state Gaza and some percentage of the current area of the occupied West Bank - maybe 97%, as Clinton proposed, or 100%, as the Arab League wants, and as the Israeli president, Shimon Peres, recently suggested.

The parties could negotiate the details of the swaps and how to implement them later, but the principle would be established and embraced by the West and the Arab League, making it harder for Hamas to reject. However, the harder issues have always been the emotional and religious ones: Jerusalem, the Haram al-Sharif/Temple Mount and refugees.

Among Israelis and Palestinians, parties and factions are already fighting about how to approach the new US initiative - another indication that it cannot be ignored. It comes late in Bush's presidency. But what may make it work is its essential modesty, given Rice's apparent understanding that a full settlement is out of reach.