The image of municipal workers, backed by armed Border Police, demolishing a practically new residential dwelling in east Jerusalem makes for bad publicity. It also exposes an underlying incoherence in Israel's approach to the capital's Arab neighborhoods.

On Monday, city wreckage crews came to the northeast Arab village of Beit Hanina to demolish a building, four floors of which had been built without a permit. The demolition was carried out after every legal "i" had been dotted and "t" crossed. Municipal officials argued convincingly that Arab builders had violated so many ordinances as to make this case one of the most flagrant and egregious in recent years.

The Post summed-up the story: "Palestinians and left-wing Israelis complain it is difficult for Arabs to obtain building permits in Jerusalem - forcing them to build illegally. The municipality insists it is evenhanded in enforcing building codes in all parts of the city." The truth, we suspect, lies somewhere in the middle. The number of housing demolitions in the Arab sector, city officials insist, is significantly down.

But Monday's justifiable demolition raises a far more significant issue: How can Israel claim to govern east Jerusalem when it has virtually no presence in most Arab neighborhoods - not even a post office or police station?

BEIT HANINA is situated inside the security fence and within the capital's municipal boundaries. Further to the east is the outlying Jewish neighborhood of Neveh Ya'acov.

There is no shortage of lovely homes in Beit Hanina. Residents pay taxes and receive health and social benefits that are the envy of West Bank Palestinians. Still, Beit Hanina is probably not somewhere you'd take a visitor to boast that Arabs are treated equal to Jews in Jerusalem. There is an ambiance of squalor. Many streets have no sidewalks; roadbeds are potholed; residents burn garbage in rubble-strewn lots. Conditions would be vastly improved if residents didn't boycott local elections, and gave themselves a say in the allocation of municipal resources. Still, Arab intransigence does not negate Israeli responsibilities.

In the Knesset Foreign Affairs and Security Committee on Monday, Prime Minister Ehud Olmert essentially ruled out the chances of a "shelf agreement" with the Palestinians within the next six months. And even if some kind of "historic agreement" could be pulled out of the hat, Olmert said it would not cover Jerusalem. He then insinuated that the capital's Arab-Jewish population mix spelled trouble. "Whoever thinks it is possible to live with 270,000 Arabs in Jerusalem must take into account that there will be" more terrorist attacks.

This leaves us befuddled. The massacre at Mercaz Harav yeshiva was carried out by a resident of Jebl Mukaber, a village which abuts the Sherover, Haas and Goldman promenades in Talpiot/East Talpiot. It's also on the Israeli side of the security barrier. Is Olmert proposing to turn Jebl Mukaber over to Palestinian control? Both "bulldozer terrorists" came from the Sur Bahir area, which is mostly inside the security fence. That village (and its Umm Tuba satellite) lies next to Kibbutz Ramat Rahel and Har Homa. Does Olmert honestly think the residents of Talpiot and its environs will be better off if Sur Bahir is turned over to the Palestinians?

THIS GOVERNMENT owes it to Israelis to publicly and explicitly delineate which parts of the city the Jewish state claims. Why not tell us what Mahmoud Abbas and Ahmed Qurei presumably already know?

And once it does, Arab neighborhoods that are to remain under permanent Israeli control should reap the full benefits of Jewish sovereignty - regardless of whether an agreement with the Palestinians is achieved.

This means swift implementation of the "Marshall Plan" Mayor Uri Lupolianski unveiled in November 2007. Rather than embroiling Arabs in red tape, the municipality would actively facilitate the construction of residential housing in east Jerusalem. With doubts about the limits of Israeli sovereignty dispelled, it would make sense to invest in infrastructure, classrooms and public gardens. Neighborhood "city halls" could be situated in places like Beit Hanina to streamline the processing of building permits, improve service delivery and provide ombudsman services.

However the diplomatic process plays out, the Arab and Jewish sections of Jerusalem must receive equal treatment - not to buy loyalty or affection, but as a concrete manifestation of Jewish sovereignty.