Q. How do you view the current political reality in Jerusalem and how does it affect the prospects for a renewed peace process?

A. The Netanyahu government is stable and professes interest in a peace process leading to a two-state solution, without preconditions. However, this is essentially a right-wing government, some of whose components are unwilling to make anything approaching the concessions necessary to advance a serious peace process with the PLO.

Netanyahu himself has pledged on several occasions to support a two-state solution; this constitutes an important policy departure for him. Yet there is as yet little to indicate that he has made the transition away from Revisionist Greater Land of Israel ideology that Ehud Olmert and Tzipi Livni made before him, or that he accepts the degree of territorial compromise--in Jerusalem and the West Bank heartland and Jordan Valley settlements--that a successful peace process requires. Nor has he laid the political foundations for an alternative coalition (with Kadima) that might support such a policy direction.

Netanyahu appears to have successfully rebuffed Obama administration pressures to implement a comprehensive settlement freeze as a confidence-building measure vis-a-vis the Arab world and particularly the Palestinians. On the other hand, he has made some far-reaching commitments to avoid any additional construction starts. These should eventually help get negotiations started but could also get him into trouble with the right wing of his coalition. Finally, Netanyahu is presiding over an Israel that is increasingly isolated in the arena of international public opinion, particularly after the Goldstone affair. This has generated a "circle the wagons" mentality in Israel of a sort that often proves congenial for a right-wing leader not anxious to make compromises for peace.

Q. And the political reality in Ramallah?

A. Here the situation is even more complicated and less straightforward. President Mahmoud Abbas has called for new elections next January 24; he has also hinted that he himself might not run for reelection. He refuses to renew negotiations with Israel without a genuine settlement freeze, a position he continues to adhere to even though the Obama administration made a serious effort in this regard that has generated substantive commitments from Netanyahu--something previous administrations never bothered to attempt.

Even according to the most liberal reading of the Palestinian constitution, Abbas' term expires in January. Hence he had little choice but to declare elections. But his threat not to run, meaning to retire at this crucial juncture, appears to be directed at extracting concessions from leadership in Washington, Jerusalem and Gaza.

Abbas' public standing has been seriously weakened of late by American pressures to meet Netanyahu at the United Nations and to not to pursue UN deliberations over the Goldstone report concerning Israel's military actions in Gaza last January. This may explain to some extent Abbas' demand for more US pressure on Israel regarding settlements. Here it must be noted that Abbas and, before him, Yasser Arafat, did negotiate with Israeli governments that were simultaneously engaged in settlement construction. Seen in this context, Abbas' resignation threat may be designed to extract additional peace process-related concessions--such as commitments regarding the scope and time-frame of renewed negotiations--from Washington and, by extension, from Jerusalem.

January elections would of necessity be held only in the West Bank. Hamas, which rules Gaza, rejects the elections initiative, denies Abbas' legitimacy as president and refuses to sign a new West Bank-Gaza unity framework drafted by Egypt. Hence, Abbas' election call for January is also designed to pressure Hamas into signing the framework. This would move elections to June, when they would be held in both the West Bank and Gaza.

If that were to happen, it is not clear who would win either the presidential or parliamentary elections, Fateh or Hamas. Nor is it at all clear who would be nominated by Fateh to run instead of Abbas (whether in January or June) if he makes good on his threat not to run for reelection.

Meanwhile, the overall economic and security situation in the West Bank has improved over the past year or two. Yet this has not muted repeated threats and predictions that a stagnant peace process will generate yet a third intifada (note that the first two intifadas broke out at times of relative Palestinian economic prosperity).

Q. What are the options the Netanyahu government currently faces for dealing with the Palestinian issue? What are the advantages and disadvantages of each?

A. Since taking office half a year ago, Netanyahu, together with Minister of Defense Ehud Barak, his Labor party coalition partner, has accelerated the pace of dismantling roadblocks and checkpoints in the West Bank and has reduced IDF security incursions and upgraded Israeli-Palestinian security cooperation. This "economic peace" approach has improved stability, but it cannot replace a peace process because it cannot generate the two-state solution necessary for Israel to remain a Jewish state--another key Netanyahu policy position. Hence the status quo, if adhered to for long, risks generating new Palestinian violence and worsening Israel's international standing and international isolation--already exacerbated by the Goldstone report.

Netanyahu professes a readiness to reopen negotiations without preconditions. If and when this eventually happens, Palestinian territorial and other demands, which will almost certainly be backed by the Obama administration, could force Netanyahu to choose among three options. First, assuming he has truly become an advocate of a two-state solution and understands what compromises Israel has to make, he can negotiate in good faith, thereby losing the support of the right-wing parties (and possibly part of the Likud) that make up the bulwark of his coalition. He would then face either new elections or tough new coalition negotiations with Tzipi Livni and Kadima.

Second, he can stonewall on issues like Jerusalem and the Jordan Valley in order to maintain right-wing support for his coalition. Labor would probably leave the coalition (if its internal schisms have not already caused it to do so). Netanyahu would become hostage to the hawks in his government. This sort of negotiations crisis could precipitate Palestinian violence as well as tensions with the US and possibly Egypt and Jordan as well.

Little wonder, then, that Netanyahu appears most comfortable, despite the risk of deterioration, with the third option: the current situation in which there are no negotiations and external pressures focus at least as much on Abbas as on him.

Q. Until very recently, President Obama and his emissary, Senator George Mitchell, have focused on the demand for a settlement freeze? What does this say about the role of the settlements in retarding peace?

A. That focus appears to have ended with Secretary of State Hilary Clinton's pronouncement recently that the Netanyahu government's commitments regarding a partial freeze are "unprecedented" and her call for Abbas to drop his own preconditions and join negotiations. The Obama administration may have misjudged if it believed it could simply persuade Netanyahu--without invoking American pressure and risking a crisis with Israel--to risk his coalition's stability and accept a more sweeping freeze. Similarly, it misjudged its capacity to extract a quid pro quo from the moderate Arab states in the form of El Al overflight rights and renewal of low-level diplomatic relations. Not only has the settlements freeze issue delayed the renewal of Israeli-Palestinian negotiations, but it has isolated Abbas politically and helped weaken his public support base.

Having said this, the administration was absolutely right in recognizing the extremely detrimental effect settlement construction has on Palestinian confidence in a peace process. Simply put, settlement expansion and a territorial deal between Israel and the PLO are antithetical. Accordingly, so are settlement expansion and the goal of securing Israel as a Jewish state--which requires that Palestinians live in a neighboring Palestinian state. Israelis must recognize that settlement expansion destroys trust in even the most generous Israeli peace offers.

A settlement freeze, including in Jerusalem, and removal of "unauthorized" outposts are specific Israeli commitments under phase I of the roadmap--commitments that a succession of Israeli governments has not met. This failure is particularly problematic at a time when the Palestinian Authority has largely fulfilled its own phase I commitments regarding security and institution-building.

Negotiations over a two-state solution might nevertheless soon be resumed under US guidance. The administration's determination in this regard has already suffered a certain loss of credibility due to the settlement freeze issue. This poses the question, especially in view of its heavy agenda elsewhere in the Greater Middle East, how determined it will be to see Israeli-Palestinian peace negotiations through to a successful conclusion.

Q. Where does Gaza fit in?

A. Under present circumstances, two-state solution negotiations leave Gaza out. This is a serious drawback for Abbas' credibility in Palestinian eyes. It also poses the specter of a "three-state solution" in which Gaza remains a kind of pariah Islamic emirate and its rulers, Hamas, seek to undermine whatever Abbas does. Many moderate Palestinians fear that a Palestinian state in the West Bank alone would lack political viability.

On the other hand, if some sort of Gaza-West Bank unity framework is soon agreed under Egypt's aegis, the reintegration of Hamas into PA institutions would almost certainly constrain Abbas' freedom of maneuver in negotiations with Israel. And if, under the unity agreement, Hamas joins the PLO (Israel's official negotiating partner), this will also be the case. In this sense, in negotiating with Israel Abbas is in a way damned without Hamas and Gaza and damned with them.

This brings us to the question whether a different approach toward Hamas might be worth considering. One way or another, it appears likely that Hamas will remain the ruling authority in Gaza. The strategies Israel has invoked in recent years to deal with Hamas, almost always with broad international and even Arab (Egypt, Saudi Arabia, PLO) support, have largely failed.

Economic warfare has impoverished Gazans without removing or even weakening Hamas; ending this counterproductive strategy could conceivably lead to a more stable and long-lasting ceasefire. A military response, however justified by Hamas' aggression, cannot buy more than a temporary ceasefire and has become highly problematic for Israel in view of international reaction. Reliance on Egypt to negotiate ceasefire and prisoner exchange arrangements has failed, not the least because Egypt has its own agenda (a legitimate one from its standpoint) of making sure that Gaza is Israel's problem, not Egypt's. The fate of a single prisoner, Gilad Shalit, has been allowed to a large extent to dictate Israeli policy, yet without producing results. The diplomatic preconditions placed on engaging Hamas (recognizing Israel, renouncing violence and respecting the Oslo agreements) have neither changed its policies nor reduced its capacity to sabotage the peace process and regional stability.

Subject to the imperative of not weakening Abbas and the Palestinian peace camp, it is time for Israel and the US to review these failed strategies and consider new departures in their approach to Hamas.

Q. Is there an option for Israel to renew the peace process with Syria?

A. Definitely. Syrian President Bashar Assad has been asking to renew negotiations for several years. The entire Israeli security and intelligence establishment is united in recommending that Israel find a way to do so. Whereas the Bush administration refused to have dealings with Syria, the Obama administration has opened a channel of communication and discussion.

The key to understanding a peace process with Syria in 2009 is to recognize that it embodies an additional strategic dimension compared to the 1990s. Then, no fewer than five Israeli prime ministers negotiated with Syria. The issue at stake was essentially land (the Golan) in return for what is likely to be a fairly cold peace, along with security arrangements, as well as an opening to peace with Lebanon. Most of these issues were discussed at length and in detail; Assad is right when he says 80 percent of the bilateral issues (including satisfactory mutual military demilitarization and verification arrangements) were concluded back then.

But today there is an additional dimension. Peace with Syria, and giving up the Golan, make sense for Israel only if Syria is prepared to downgrade its relationship with Iran and cut military ties with Hamas and Hezbollah, Iran's proxies on Israel's borders. And Damascus must do so in a demonstrable way that convinces the Israeli public that giving up the Golan has been rewarded with a major strategic coup: pushing Iran out of the Levant. There is evidence that Assad understands this is the price he will be asked to pay. The Obama administration, which inevitably will be called upon to compensate Syria economically (together with the European Union) and guarantee the security aspects of the agreement, is using its engagement with Syria to test whether Damascus is really prepared to close its border with Iraq to infiltration and desist from meddling in Lebanon's affairs. If and when it invites Assad and Netanyahu to talks, there is every reason to believe both will come.

Q. To conclude, where should President Obama concentrate his efforts in the year ahead with regard to Israel-Arab peace?

A. First and foremost, getting Abbas and Netanyahu together for talks. Without a dynamic Israeli-Palestinian peace process, we are liable to witness backsliding toward extremism and violence. Once talks begin, the administration will have to calibrate its options carefully to ensure that negotiations--as long as they are useful--don't provoke destabilizing political crisis on either side. This may mean scaling back negotiations regarding some of the more "existential" core issues involved in negotiations and concentrating on issue-areas, such as borders, where significant progress was registered in earlier talks.

Second, accelerating the process of getting Israel and Syria into peace talks. The payoff of a dynamic peace process between Jerusalem and Damascus could be highly significant strategically for both Israel and the US. By blunting Iran's hegemonic drive in the region and helping stabilize Iraq and Lebanon, it could contribute to the US drive, which Israel supports, to neutralize Iran's military nuclear ambitions through non-military means. And by weakening radical elements like Hamas, it could improve Abbas' freedom of maneuver in his own negotiations with Israel.

Finally, while Obama has projected positive new American policies to the Arab and Muslim worlds and restored an important measure of trust, Israelis remain suspicious. With all due respect to its importance in the American context, Obama's hands-on approach with the American Jewish community does not impress Israelis, while the Netanyahu government has its own demagogic reasons for cultivating Israeli concerns and fears. Obama at some point soon should bypass both, come to Israel, talk directly to Israelis about his support for a secure Jewish state, and explain what Israel has to do to help make this happen.