Grasp the Arab olive branch, energize US diplomacy

There is tragic irony in the fact that Israelis and Palestinians are caught up in a massive new surge of violence only days after the Arab League, in a historic gesture, offered peace and normal relations with Israel in return for Israel's withdrawal from the occupied territories.

The Arab proposal and its dismissal by Israeli Prime Minister Ariel Sharon, who said it would lead to Israel's destruction, remove all doubt that the core of this conflict is no longer Israel's rejection by the Arab world. It is the struggle of the Palestinians for a viable state of their own against the stubborn determination of Mr. Sharon and the Israeli right wing to deny this by preserving Jewish settlements in the occupied territories.

The collapse of the Oslo peace process, 20 months of Palestinian terrorism, brutal Israeli counterviolence, and mutual propaganda have obscured this reality. Last week's appalling "Passover massacre," the Israeli Defense Force's massive invasion of Palestinian areas, and Sharon's decision to hold Palestinian leader Yasser Arafat as a virtual hostage have only deepened a growing sense of despair and mutual hatred.

A two-state solution and peace would have been possible years ago, had it not been for the foolish policy of all Israeli governments since 1967 to create settlements in the occupied territories. Sharon was a principal architect of the settlement movement, which was designed to prevent a Palestinian state by creating "facts on the ground." Today, there are about 400,000 Jewish settlers.

After 1967, when Arab states and Palestinians still rejected Israel, Israeli leaders cited security to justify keeping the territories and building settlements. But today, the policy of colonization through settlement, to which the Sharon government stubbornly clings, is an unmitigated disaster. The current intifada is dramatic proof that Israel can never be secure without liberating the Palestinians, abandoning most settlements, and accepting a viable Palestinian state.

Sharon claims that Palestinian terrorism betrays Palestinian acceptance of peace and that Israel is again fighting for survival. Many Israelis now believe this, and almost all view Palestinian demands for the right of refugees to return to Israel as a Trojan horse. It is true that Palestinian Islamist radicals still dream of destroying Israel. But all mainstream Palestinian leaders have stuck to their pledge for peace with Israel in return for a Palestinian state within the 1967 borders. As for the "Right of Return," Palestinian leaders, Arafat included, have acknowledged that the refugee issue must be negotiated in a way that is mutually acceptable. Likewise, the Arab League declaration called for an "agreed" solution for the refugees.

Sharon's formula for protecting Israel's security is to accept only a token Palestinian state in 42 percent of the territories, preserve all settlements, and cede no part of Jerusalem. This concept is driven by ideology and is wholly unrealistic. Palestinian aspirations for a genuine state, not just enclaves in a rump Israeli protectorate, cannot be crushed. Without a political solution similar to the Arab proposal, the status quo ensures chronic violence. For Israelis, the consequences are not just permanent insecurity, but defeat of the Zionist dream for a state in which Jews can live normally, and corruption of Israel's democracy through repression and occupation.

The Bush administration is correct in insisting that the Palestinians stop terrorism. But, as the crisis deepens, it's clear that this one-note policy has failed and needs to be broadened. Washington has overestimated Arafat's ability to command an end to violence, and it has failed to offer the Palestinians a realistic hope that there is a better way to win their state through negotiations. Since Sharon offers nothing in return for the Palestinians but defeat, only the US can offer such hope.

If the Bush administration is serious about peace, security for Israelis, and justice for Palestinians, it must begin addressing not just Palestinian violence and terrorism, which are symptoms of the conflict, but also the causes: Sharon's rejection of a viable Palestinian state and his commitment to settlements. Herein lies a way out of this tragic impasse. A bold American plan, building on the Arab League declaration, is desperately needed. It should promise security for Israelis: abandonment of most settlements; a Palestinian state defined by the 1967 line, with negotiated border adjustments; a compromise on refugees that protects Israel's Jewish demographics; and a commitment to make this work. There is no other way to stop the killing, restore hope, and resurrect a political process. Such a plan would win many Israeli and Palestinian allies, rally support in the US, and rescue America's faltering leadership as a peacemaker.

• Philip C. Wilcox Jr. is president of the Foundation for Middle East Peace.