The Four Sticking Points

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To jump-start peace talks and boost American credibility with Arabs, U.S. officials tell Time that they are thinking about dangling an international offer of diplomatic recognition for Palestine. If it helps Colin Powell coax the Israelis and Palestinians back to negotiations, the dramatic gesture would be valuable. But it may not have any lasting effect on two sides so hate-soaked and at odds. When Crown Prince Abdullah of Saudi Arabia offered in February to broker Israel's peace with the Arabs in exchange for a Palestinian state, the plan was applauded as a step forward--although land-for-peace has been the bedrock premise for ending the conflict since 1967. Now even that basic idea is at risk, since both sides have trampled their interim agreements, nullifying virtually every step they ever took in search of peace.

That goal will remain elusive until Israel and the Palestinians come to terms on the so-called final-status issues that require the toughest compromises. The antagonists came close in a series of taboo-shattering discussions begun at Camp David in 2000 that nearly concluded before President Bill Clinton and Prime Minister Ehud Barak both left office in early 2001. If negotiations ever do resume, Arafat wants to start where those talks left off. But Sharon has revoked previous Israeli offers. Here are the four chief obstacles to peace in the Middle East.

Palestine's Borders
The Palestinians want full sovereignty over all the West Bank and Gaza Strip land they inhabited before Israel's victory in the 1967 war. It might be possible for Israel to give those lands back--as it did with Sinai in 1979--if it were not for the 163 Jewish settlements now dotting the land. Since the peace process began in 1993, the number of Jewish settlers in the territories has doubled, to 214,000. Before Sharon's latest military incursion, the Palestinians had won full control of just 18% of the West Bank, scattered in a noncontiguous patchwork.

When last they talked in January 2001, Israeli and Palestinian negotiators crafted a far-reaching solution. A Palestinian state would encompass all of Gaza and up to 96% of the West Bank. To make up for territory annexed to keep many settlements, Israel would swap an equal percentage of land inhabited by Arabs inside Israel. Arafat accepts the idea but rejects anything less than a solid, contiguous border. Sharon's grudging acceptance of an "eventual" Palestine never goes far beyond civil autonomy for Palestinian islets in a sea patrolled by Israeli forces.

In 1948 waves of defeated Palestinians fled Israeli territory to find shelter in squalid camps that the years have made permanent. From the ramshackle alleys of Jabalia in the Gaza Strip, a camp crammed with 102,000 people, to the 1,800 in tiny Beit Jibrin, nestled inside the West Bank city of Bethlehem, more than 623,000 refugees are stuck in 27 camps across the occupied territories. An additional 612,000 live miserably in 32 camps in three neighboring countries. For generations, they have all been waiting for the right to return--to the homes they lost in Jaffa or Haifa or the verdant Galilee.

Although Palestinians cling to the U.N.-endorsed "right of return," it's not going to happen. To let hundreds of thousands of Palestinians live inside Israel would be suicide for the Jewish state, destroying it by demographics. Yet the refugees have to find a home somewhere, or succeeding generations will never stop making war on Israel.

Creative negotiators during 2000 thought the issue could be finessed. Israel could recognize the right in principle, while the Palestinians mulled over a proposal that, as a practical matter, most of the refugees could go back only as far as the new Palestine. Arafat has spoken of "understanding" that any return of refugees "must be implemented in a way that takes into account" Israel's unshakable determination to remain Jewish. But Sharon's Likud Party has rejected the return of any Palestinian refugees, from anywhere. And Arafat can't guarantee those 1,235,000 camp refugees will accept that they're never going all the way home.

Both sides want the ancient city as their political and religious capital. Camp David negotiators foundered over the Muslim and Jewish holy places, which sit virtually atop one another. The Palestinians insist on sovereignty over the Haram al-Sharif, where their sacred shrines sit, and Israel cannot give up the ground underneath it, where the Western Wall and the remnants of Solomon's Temple lie. By 2001, negotiators hoped they could finesse these demands and could gerrymander the city into an Arab East Jerusalem that the Palestinians could call a capital and a Jewish West Jerusalem that the Israelis could keep as theirs. But Arafat scuttled Camp David when he couldn't get enough of Jerusalem. And Sharon--who in 1987 acquired a house inside the Arab Old City and decorated it with a huge menorah--said Friday that the city will "forever" be the "united capital" of Israel.

The New Reality
If all the old arguments weren't bad enough, now a deeper-than-ever hatred is poisoning both sides. Earlier this month Arafat aide Ahmed Abdel Rahman told the Israelis, "The air hates you, the land hates you, the trees hate you--there is no purpose in your staying on this land." Palestinian extremists who never accepted Israel's right to exist spearhead the suicide-bombing campaign, while Israeli tanks, under a Prime Minister who has always opposed the Oslo process, roll back into the patches of territory laboriously ceded to the Palestinians since '93. The knottiest of these issues may be the two stubborn old commanders, Sharon and Arafat. Both believe that violence pays, and neither can bear the thought of negotiating with the other. There's nothing in Colin Powell's briefcase to change that.