Taking the American side, the leader of the parliamentary opposition, Tzipi Livni, was quick to accuse Netanyahu of superfluously creating an impediment in US-Israel relations. In April, we recall, when Netanyahu asked Livni and her party to join his government, she rejected his bid because he had refused to commit to the principle of “two states for two peoples.” She took the position that the border between the states, as agreed to by the Palestinians in their talks with her, would anyhow leave the settlement blocs in Israel’s hands. Yet without commitment to a two-state solution, construction in those blocs would be hard to justify.

Netanyahu understood the message. In his Bar Ilan speech, intended as his answer to Obama, he came out for a Palestinian state. However, he took pains to present certain principles that eliminated any real possibility for its coming into existence: Palestine, he said, must recognize Israel as a Jewish state; it must be demilitarized (this implies not only the lack of an army, but also lack of control over borders and air space, and no possibility of forging alliances); and, finally, the dropping of all demands that the refugees be permitted to return to Israel. He pledged to expropriate no further lands for settlements, but he pointedly omitted any mention of a construction freeze. It is no wonder that the Palestinians rejected these conditions. The Americans, however, tried to make the best of the speech, while continuing to push for an Israeli commitment to stop construction in the settlements.

As expected, Netanyahu’s Bar Ilan speech did not get anything started. On the contrary, Foreign Secretary Avigdor Lieberman, in a press conference with Hillary Clinton, enunciated Israel’s outright refusal to freeze construction. The result followed quickly: a scheduled meeting with America’s special envoy to the region, George Mitchell, was canceled.

After the Israeli Foreign Secretary had burned his bridges with the US (and not only with the US: consider French President Nicolas Sarkozy’s recommendation to Netanyahu that he fire Lieberman), Defense Minister Ehud Barak was sent to pull the chestnuts out of the fire. This journey led to negotiations on a temporary freeze. Yet once again, Israeli preconditions torpedo any chance that this will happen. In return for the temporary freeze, according to the local press (Yediyot Aharonot and Haaretz, week of July 2, 2009), Israel demands a commitment by the Arab states to normalize relations; Palestinian recognition of Israel as a Jewish state; and the promise that a future Palestinian state will be demilitarized. In short, the Palestinians are to forfeit all their bargaining chips in return for a temporary freeze on Israeli settlement construction, and with no commitment on Israel’s part to withdraw to the 1967 borders or dismantle even one illegal outpost.

For the American administration, an Israeli commitment to a construction freeze in the settlements would enable Washington to jumpstart a political process within the Palestinian Authority (PA), aimed at bolstering the shaky position of its president, Mahmoud Abbas (Abu Mazen). The radical elements in the Arab world, and especially Hamas (which has ruled the Gaza Strip since its bloody ejection of Abbas supporters in 2007) see no reason for concessions as long as Israel’s right-wing government abides by its refusal. True, both Arab extremists and moderates welcomed Obama’s Cairo speech, but they raised questions about his ability to influence, saying, in effect, Let’s see you translate words into action.

A commitment to freeze construction in the settlements could result in the breakup of the present Netanyahu government; meanwhile, the PA is already divided, leaving Abbas no authority to reach binding agreements. Recently the reconciliation talks between Hamas and Fatah, conducted in Cairo under Egyptian mediation, collapsed for the umpteenth time. With American assent, Abbas avoids renewing the negotiations with Israel because of its refusal to stop settlement construction, and at the same time he hardens his positions toward Hamas. For its part, Hamas demands liberty for 800 of its supporters imprisoned by the PA in the West Bank, as a condition for an agreement that will enable new presidential and parliamentary elections in January 2010.

Obama is operating on two fronts. On one he presents Netanyahu with hard choices, and on the other, he exerts enormous pressure on Hamas, demanding that it forgo armed struggle and accept the Oslo agreements. In this context we may understand the green light given by Washington to the establishment of a new Palestinian government under Salam Fayyad, whom it trusts (and whom Hamas detests). Likewise, we can understand why Washington exerts no pressure on Israel to lighten the siege of Gaza.

The intention is clear: America seeks to prevent, at all costs, a (likely) Hamas victory in the next elections. It doesn’t want to repeat the mistake of 2006, when Hamas won – and instead of moderating its positions, used the victory as a springboard for taking over Gaza and strengthening itself in the West Bank. If Hamas desires new elections, it will have to recognize the legal framework on which the PA is based. One plays by the rules or one does not play.

But Obama stands before two leaders who refuse to play by the rules. One refuses to recognize Israel, the other refuses to recognize Palestine. The first is Khaled Mashal, head of Hamas, and the second is Binyamin Netanyahu. Both would endanger their political futures by accepting the American conditions. Thus we find a strange common interest between the two, each using the other’s existence to justify non-entry into a process aimed at ending the conflict.

Obama too has a lot to lose. The Republican opposition is waiting for him to slip. But let us suppose that his plan were to work: Hamas agrees to forgo armed struggle and play by the rules, and Israel freezes construction in the settlements — what then? Now arises the question: what does Obama have in mind when he says “two states”? He has indeed proclaimed his commitment to a Palestinian state, but he is also committed — and this above all – to Israel’s security. If so, then what kind of Palestinian state are we talking about? What kind of sovereignty will it have? Will it enjoy territorial contiguity? What will be done with Jerusalem? What will be the fate of the refugees? Given America’s strategic commitments to Israel — and given Obama’s silence concerning these questions — we cannot but worry that he basically accepts the Israeli version of a Palestinian state, a version that empties it of all content.

Obama’s basic problem when it comes to the Palestinian-Israeli conflict is the same as his problem when it comes to America’s economic issues: he is trying to bring about far-reaching change within a failed framework. His apparent inability to go outside the box — global capitalism on the one hand, and the Oslo agreement on the other — is likely to be his nemesis. The Israeli-Palestinian conflict requires a solution within a new strategic framework. Here Israel must no longer be the dominant player, rather one among the nations of the region. It must no longer occupy the land of others, but must gain acceptance on the basis of its readiness to respect the sovereignty of its neighbors, including Palestine.

The huge demonstrations of the first week reflected lack of confidence in Iran’s electoral system, not merely because the regime can easily fabricate the result, but also because, at base, this system is far from reflecting the will of the people. Political parties are outlawed, so the choice is among personalities. In order to prevent the election of anyone who is anti-regime, every candidate must be approved by the “Committee for Preservation of the Constitution,” whose task is to ensure fidelity to Islamic rule.

Among 475 initial candidates this time (including 42 women), only three men were permitted to challenge the incumbent. Thus anyone who wanted to depose Ahmadinejad had to vote for one of these. As it turned out, Mir Hossein Mousavi, who had been prime minister under the Ayatollah Khomeini, garnered support from most of those who were fed up with Ahmadinejad and his patron, the supreme religious authority in Iran, Ali Khamenei.

What caused hundreds of thousands to pour into the streets and risk their lives? How did it happen that the Supreme Authority lost his authority? Iran is an enormous exporter of oil, like several other third-world nations, and its economic situation is no better than theirs. It is no accident that the president of Venezuela, Hugo Chavez, came out in support of Ahmadinejad. Both countries produce oil; both suffer from chronic unemployment, rising inflation and poverty that cries to the heavens. Chavez is the idol of the masses. Ahmadinejad too, by his way of dressing and talking, his anti-imperialist positions and his relentless enmity toward the US and Israel, presents himself as a revolutionary and a friend to the poor.

It seems, however, that many Iranians remain unimpressed by Ahmadinejad’s rhetoric. More than anything, they are troubled by the suppression of human freedoms, the cruel subjugation of women, and the imposition of Islamic fundamentalism as a way of life. If we add the economic backwardness of Iran and the religious bureaucracy’s control of its oil revenues, we get a ticking bomb. When the regime uses terror against the Iranian people, this will only speed the moment of explosion.

For the fact is that thirty years since the ousting of the Shah, the Iranian Islamic Republic has not succeeded in providing its people with a decent life. Ahmadinejad plumes himself with the feathers of the poor, but the location of those who vote for him shows Iran’s failure to propel its society beyond the poverty line. According to the meager information we have, it was the urban population — the focus of economic and cultural power in every modern society — that voted against Ahmadinejad. The poor, living in remote villages throughout the country, may form the electoral majority, but their contribution toward building the society is small. What’s more, where there is no freedom of assembly and the regime is all-powerful, nothing is easier than to buy the loyalty of those who live on charity.

The Iranian protest movement is not a foreign import. Nor does it resemble elitist, reactionary protest movements like the orange revolution in Ukraine. Iran’s green movement reflects an authentic will to change an oppressive regime that has impeded the country’s economic, social and cultural development. But this movement has a problem. It lacks leadership. Mousavi has been a channel, to be sure, for expressing revulsion from the regime, but he cannot encompass the unorganized currents that have now begun to flow. For this reason the regime will succeed, temporarily, in suppressing the demonstrations and imposing its will on the people.

Yet the green movement will prove to be a landmark. The division within the regime between the reformists and the conservatives did not first emerge as a result of the demonstrations: rather, it made them possible. That division has existed ever since the death of Khomeini in 1989. It was expressed in the election of reformist candidate Muhammad Khatami to two terms, from 1997 until 2005. But Khatami disappointed his constituents. Against the determined opposition of the Supreme Authority, Ali Khamenei, he failed to implement the reforms he’d promised: to eliminate corruption and bring more democracy.

Within the religious establishment there is division between Khamenei and Hashemi Rafsanjani, one of Iran’s wealthiest persons, who is considered an important religious authority. Rafsanjani is influenced by the disappointment of the people, especially the urban middle class. By continuing to alienate them, he knows, Khamenei courts disaster. Rafsanjani holds that the government must express the will of the classes that constitute the society’s economic and cultural base. The conservatives, on the other hand, see any departure from religious law as dangerously corrosive.

All the democratic forces in Iran, including the Communist Party (which is underground), called on the people to support Mousavi in the recent elections. They accurately gauged the mood of the masses: that behind Mousavi a broad movement has gathered, whose strategic aim is to topple the totalitarian regime. This internal division opens a new horizon for the Iranian people after thirty years of arrests and assassinations directed against the leaders and parties that deposed the Shah. Iranians may hope at last to rebuild their parties and trade unions toward the creation of a democratic Iran.

The hesitant support of US President Barack Obama, the cynical pronouncements of Israeli PM Binyamin Netanyahu (who broadcasts his shock at the firing on protesters in far-off Tehran but never in nearby Bil’in), the crocodile tears of the Shah’s son in Washington – need not mislead us. The Iranian people have no wish to sit again on Uncle Sam’s lap, lining up against the Arab world. The Iranian people have no wish to exchange the present dictator for a new Shah. The Iranian opposition knows what colonialism means. It sees what goes on in the occupied Palestinian territories. It sees what globalization has wrought among the peoples of the world. It will not move backward. Its whole will is to bring the Iranians, schooled in struggle and disappointment, as a free people into the family of peoples.

The revolution of 1979 against the Shah was never intended to usher in a Shiite dictatorship, but the Ayatollahs co-opted it. The lesson has been learned, and the new Iranian movement will know how to guard basic rights and freedoms.

There is a direct connection between what is happening in Iran and what is happening in the US. Until recently, who dreamed that Americans would elect an Afro-American president? The Obama Effect reverberates through the Middle East. He has overthrown the Bush policy, which created abysmal hatred against America — a hatred well exploited by the Iranian regime and its allies.

We should bear in mind, though, that Obama was not elected to make peace in our region, rather to rescue America from the worst economic crisis in eighty years. The American people seek liberation from the free-market fundamentalism of the neo-cons, while the Iranian people seek liberation from religious fundamentalism. The concurrence of these two movements is no coincidence. One process feeds the other and is fed in return. George W. Bush used Iran to frighten Americans, while Ahmadinejad used Bush’s America to strengthen his hold on Iranians. Now both societies have exhausted their political-economic systems. Obama’s election expresses the American will for change, and the outcome of the Iranian election brings hundreds of thousands into the streets. In America the crisis is more purely economic. In Iran it is political and economic. Yet these two very different processes, in two very different societies, belong nonetheless to the same historical moment: it is a moment of systemic change, with societies converging toward democracy and social justice.

The events in Iran are not foreign imports, just as the events in America are anchored in deep internal change. The world is going through a process that will alter an entire system, where predatory capitalism has lived in friction with an Islamic fundamentalism bent on correcting “the evils of the West.” It is not just the free-market system that has reached a dead end. The Islamic “resistance” too has exhausted itself, in Lebanon and Palestine as well as Iran. Events in Iran send shock waves through all the Arab regimes that deny basic rights to their citizens. Iranian women are an example for Arab women, and Iranian workers are an example for Arab workers whose right to form unions is denied. This is the real “Iranian bomb.” Israel must fear it, and America too — for Obama is counting on the old alliances with Arab dictators. The development of this “bomb” will take time, no doubt, but Netanyahu, Ehud Barak and Tzippi Livni ought to read the writing on the wall: the years of the Occupation are numbered; it will become increasingly anachronistic as Arab masses take to the streets, challenging their regimes in the name of democracy and human rights. Thirty years ago the Iranian revolution changed the face of the Middle East toward fundamentalism. Today, on the streets of Tehran, appear the first glimmers of real democracy.

On hearing these words, Barnea rubbed his eyes in astonishment. Today, it would appear, the message is no less relevant. In Olmert’s appraisal, if no solution is found to the Palestinian question, Israel will wind up with an apartheid regime; the Palestinians of the Occupied Territories will then demand the right to vote. The democratic West, he knows, will not forever tolerate an ethnocracy that withholds this right from a third or more of its subjects. Such is the Zionist nightmare.

The head understands, but the hands lag behind. Or to vary Abba Eban’s quip: where peace is concerned, Israel has never missed an opportunity to miss an opportunity. Apparent exceptions turn out to prove the rule. In the Oslo Accords of 1993, for instance, the Palestinians recognized Israel. But playing its usual zero-sum game, Israel tried to use the Accords as a means to extract concessions. By the end of the 90′s, blockades, settlement expansion, economic manipulation and political intransigence had wiped out Palestinian trust. The result became apparent at Camp David in July 2000: Yasser Arafat knew he did not have a mandate to sign.

Or consider the Sharon-Bush vision of June 2003, articulated in their letters of April 2004. Haunted by the Zionist nightmare, Sharon saw the need for a Palestinian State, but he could not bring himself to allow a real one. The vision announced by Bush amounted to a state without substance. It would be fractured territorially, it would lack military capability, and it would have no control over borders or air space. The economically weak Palestine was to remain dependent on Israel, whose needs it would have to serve. In this way, Israel and the US vitiated the concept of a Palestinian state, encountering no international opposition.

Then came the disengagement from Gaza in August 2005. Israel insisted on unilateralism. “There is no partner,” was Sharon’s mantra, although Mahmoud Abbas (Abu Mazen) of Fatah was president. Sharon (and Olmert, his deputy) bypassed him. This turned out to be a major error. If disengagement had come about through negotiations with Abbas, he could have taken at least partial credit for Israel’s withdrawal. In the event, Hamas took it all.

A few months later (January 2006) the Palestinians overwhelmingly elected a Hamas government (although Abbas was still president). The two years since the Hamas landslide have been difficult ones for them. Hamas has refused to accept the West’s conditions that it recognize Israel and accept the Oslo Accords. As a result, the US and Europe have backed a political and economic blockade against it, seeking to destabilize its rule. In June 2007, in Gaza, matters came to a head. Hamas took the Strip in a military coup.

This event has immensely complicated the chances for peace. If Israel were to reach a separate agreement with Abbas in the West Bank, there would still be rockets from Gaza. Also, what guarantees that Hamas won’t take over the West Bank too? The notion of “two states for two peoples” has faded farther away than ever. For example, in building the separation barrier as it did — carving off pieces of the West Bank to protect its settlement blocs — Israel may have been nursing the idea that the barrier would one day mark the border. The Hamas victory has foiled that too: a wall does not stop rockets.

Such were the realities behind the Annapolis Conference. At first it was meant to set forth principles for peace. According to first-hand sources on both sides, these were already formulated in the year 2000 at Camp David and Sharm al-Sheikh. At that time, however, trust between the sides was lacking, and regional conditions were unfavorable. Today an agreement is impeded by the internal Palestinian situation.

No discussion of principles or prior understandings can occur as long as the Territories are divided between Fatah in the West Bank and Hamas in Gaza. An Israeli withdrawal from the West Bank, it is feared, will lead to a Hamas takeover there too. For this reason, Israel has clung to the Road Map as a life preserver. It obligates the PA to eliminate the terrorist infrastructure as a precondition for Israel’s withdrawal. This implies the renewal of Fatah control over Gaza. Israel is not about to begin a civil war with its settlers as long as it lacks a secure and stable partner on the other side.

And so we come full circle: given the might of the Israeli Occupation, the power of Hamas, and Fatah’s lack of credibility, what chance has the Fatah leadership — no matter how moderate it may be—to govern its people and wage peace?

The most significant new factor in the Israeli-Palestinian conflict is the enormous decline in the status of the PA after Fatah lost Gaza to Hamas. It is an axiom among all the mainstream Israeli parties that the State no longer has an interest in direct occupation. Yet the facts on the ground keep Israel from handing the reins to Abbas.

Theoretically, the daily rocket attacks from Gaza might stop if Israel were to reconquer the Strip. Yet such a step could hurtle the region into a tailspin, undermine what remains of Abbas’s rule in the West Bank, and force Israel to reconquer the cities there too. The notorious Civil Administration would then return, and Israel would have full, direct responsibility for the feeding, education and employment of 4 million Palestinians. Added to the 1.4 million Arabs living as citizens within its borders, the number of Arabs under Israel’s rule would then almost equal the number of Jews (5.7 million).

The nominal PA rule over the cities of the West Bank, along with the Hamas domination of Gaza, enables Israel to maintain an indirect occupation while avoiding responsibility. But if Israel were to retake Gaza and then (following a PA collapse) the West Bank, that would bring on the Zionist nightmare.

We may regard Annapolis, then, as a desperate attempt to strengthen Abbas, prevent the PA’s collapse and save the Jewish State. At the subsequent Paris Conference, the developed nations pledged $7.5 billion toward the building of Palestine. The West has recognized that this latest effort may be the last chance for a two-state solution.

What exactly is the nature of the Jewish state that is thus endangered? It has become clear in recent years that Israel’s drive to separate the two peoples is not meant as penance for its crimes of forty years. The desire for separation results rather from the evaporation of the Zionist ethos. This ethos once embraced all Jewish citizens of the state, but it has shriveled to embrace the successful alone. From a nation for all its Jews, Israel has become a nation for all its rich. The classes that have lost strength in recent years, such as workers who could not make the transition to high-tech, or those displaced by foreign labor, or single mothers, have become a burden on the state (that is, on the rich), just as the Palestinians in Gaza and the West Bank are a burden. Israel seeks a model for separating from the Palestinians, while it employs a neoliberal model to separate from its own poor. Recently, for instance, the Olmert government faced the longest and most militant teachers’ strike in the country’s history.

Criticism of the government is concentrated on two levels. The first is political, focusing on its inability to bring the peace that alone can secure the continuation of the Jewish State. The second level is that of class conflict. The same Jewish State, which once symbolized job security and a homeland for most of its citizens, is breaking up before their eyes. It has detached itself from the workers and the poor. In a nation that lacks both physical and economic security, we cannot expect solidarity.

On the analysis given here, Israel is damned if it does and damned if it doesn’t. Perhaps it still has time to save the two-state solution — and itself — by doing what it should have done long ago: through bilateral agreement, it should have dismantled the settlements and withdrawn to the lines of 1967. But the likelihood of such a conversion is now near zero, because a new element has entered the picture: Hamas, which might do in the West Bank what it has done in Gaza.

Israel is also damned, on the other hand, if it does not withdraw to the lines of 1967, for it will then have to face the ever stronger forces pushing for a single democratic state. The time has come for hard decisions: either help build an independent Palestine or face a one-state solution.