At the end of my conversation with Sari Nusseibeh at the American Colony Hotel in Jerusalem, the highly respected president of Al-Quds University - and cosignatory of " The People's Choice" a peace plan that he formulated with former Shin Bet chief Ami Ayalon - told me he wouldn't be surprised if one of the Palestinian residents of the city ran for mayor in the municipal elections in November. The candidate would not run as a representative of Jerusalem per se, Nusseibeh stressed. Rather, he would be running on behalf of all Palestinians in the occupied territories.

"Why don't you do it?" I blurt out. The 59-year-old son of Anwar Nusseibeh, a Jordanian government minister, does not smile. "It's possible," says the professor of Islamic philosophy, who briefly replaced Faisal Husseini a few years ago as the top Palestinian official in East Jerusalem. "Anything is possible," he adds without batting an eyelid.

Nusseibeh's previous contention that the Oslo "house of cards" had begun to collapse was further confirmed by this week's report in Haaretz regarding Prime Minister Ehud Olmert's latest peace offering (Israel would annex 7 percent of the West Bank and compensate the Palestinians with territory in the Negev, which would be equivalent to 5.5 percent of West Bank land; an agreement on the future of Jerusalem would be postponed to a later date; there would be no right of return for Palestinian refugees to Israel; and the entire plan would be implemented after Hamas is removed from power in the Gaza Strip). Nusseibeh says he knows full well what happens during negotiations - or, to be more specific, what does not happen. For over 20 years the Palestinian leadership has been trying to persuade their people to agree to a state along the June 4, 1967, lines, while Israel has been destroying that option, Nusseibeh explains, adding: "You cannot negotiate anything about final status if you don't talk about Jerusalem. Final status consists primarily, I believe, of Jerusalem and refugees. If you want to postpone Jerusalem, you postpone refugees. Really, you are not dealing with the problem. You have to discuss these issues, and that is exactly where the trade-off has to be made."

Is Sari Nusseibeh, the secular Palestinian, the symbol of moderation, Ayalon's guy, burying the two-state solution?

"I still favor a two-state solution and will continue to do so, but to the extent that you discover it's not practical anymore or that it's not going to happen, you start to think about what the alternatives are. I think that the feeling is there are two courses taking place that are opposed to one another. On one hand, there is what people are saying and thinking, on both sides. There is the sense that we are running out of time, that if we want a two-state solution, we need to implement it quickly.

"But on the other hand, if we are looking at what is happening on the ground, in Israel and the occupied territories, you see things happening in the opposite direction, as if they are not connected to reality. Thought is running in one direction, reality in the other."

Nusseibeh says the struggle for a one-state solution could take a form similar to some of the nonviolent struggles waged by oppressed ethnic groups in other places.

"We can fight for equal rights, rights of existence, return and equality, and we could take it slowly over the years and there could be a peaceful movement - like in South Africa," he notes. "I think one should maybe begin on the Palestinian side, to begin a debate, to reengage in the idea of one state."

'Jerusalem is out'

"We have failed in the last 15 years," Nusseibeh continues, "to create the world we wanted to create. We were supposed to be very clever; we convinced ourselves that we were going to be very democratic and clean, a model for the rest of the Arab world. And Jerusalem was supposed to be our capital. That's what we believed. But then it turned out that all of this was total rubbish. Jerusalem is out, all we have is Ramallah. And we lost Gaza. There is corruption and inefficiency. This is not what we vouched for when we sat back in the early 1980s and ideologized the two-state solution.

"It so happens that Fatah, in particular, the mainstream party and the only viable alternative to extremes on the left or on the right, now needs a strategy, an ideology. Because the ideology that Fatah has adopted over the last 15 years - a two-state solution - seems to be faltering, and with it, Fatah is faltering. So it is time maybe to rethink, to bring Fatah around to a new idea, the old-new idea, of one state. "

The recent "bulldozer terrorism" in Jerusalem did not highlight the difficulties inherent in a binational state model?

"These are isolated incidents, but they do reflect a major sickness in our Jerusalem Arab society. A sickness that has resulted in pressure, schizophrenia, the fact that these people speak Hebrew, and listen to Hebrew songs, go out with Israeli girlfriends while at the same time they live in Arab neighborhoods and under the influence of Muslim culture. There are contradictory forces pulling at them.

"What is the driving force behind a two-state solution? The fact that it seems more acceptable to a majority of people on both sides and therefore more applicable. The primary motivation is to minimize human suffering. This is what we should all be looking at. If there will be a one-state solution, it will not come today or tomorrow. It's a long, protracted thing, not the ideal solution. Unless, in an ideal world, people really want to be together, then it is the ideal solution. The best solution, the one that causes the least pain and that can actually be instrumental to a one-state solution, is to have peace now, and acceptance of one another on the basis of two states."

Is this an ultimatum?

"That's an ultimatum. Unless a major breakthrough happens by the end of this year, in my opinion we should start trying to strive for equality. Back in the 1980s, before the first intifada, I was saying there was schizophrenia in the body politic of the Palestinian people. It was like the head was going in one direction, which was the direction of seeking independence, national identity - but the body was slowly immersed in the Israeli system, and I said it can't last because it looks like it will snap. Either the body will join the head so that there will be a civil disobedience campaign, or the head will have to join the body, so that there will be a civil rights campaign, to become part of the Israeli system.

"Fifty, 100, 200 years down the road there will be some kind of conclusion. Sometime in the future - however far away this future is - I believe we'll be living at peace with one another, in some way or another. I am not sure how, whether in one state or two states, or in a confederation of states, but people finally will come to live at peace. In the meantime, we will simply cause pain to one another. It's tragic. It is very tragic, because we know we can do it now. That today it is possible with some guts, leadership, vision, we can make it happen today, we can reach a peaceful solution today. [The Arab Peace Initiative proposed in 2002] is a fantastic chance. The Palestinians have adopted it, they'll go with it all the way. It is a perfect chance. It doesn't even mention right of return. It is even better than the Ayalon-Nusseibeh plan, but I am willing to accept it."

'Dead money'

Asked why he - who realizes so well how complicated it will be to reach a fair and logical solution regarding Jerusalem - is opposed to Olmert's idea of postponing discussion on that issue, Nusseibeh says he hopes that the prime minister is not repeating the same mistake made by Ehud Barak at Camp David, and that the idea of postponement was broached strictly for public relations purposes.

"Because for Israel, however important Jerusalem may be, the primary factor is the Jewish character [of the state]. And however important the refugees might be, what is more important for the Palestinians and Muslims is Jerusalem. It is the issue over which the most extremist of refugees will be willing to make a sacrifice. Let's hope this is not where [Olmert and Palestinian President Mahmoud Abbas] are disagreeing. If that is what they're disagreeing about, then there's no hope. We have to do everything now, we have to put everything on the table.

"The facts on the ground are making [the situation] irreversible," Nusseibeh warns. "Take the Clinton parameters - Palestinian neighborhoods are Palestinian sovereignty, Jewish neighborhoods are Jewish sovereignty. They are acceptable in principle, but with realities on the ground, like the expulsion of Arab families from their homes in the Sheikh Jarrah neighborhood, and the inhabitation of those areas by Jewish settlers, it's going to be unacceptable on a practical level. That's why we don't have time."

You ruffled some feathers among the Palestinian leadership when you recently asked the Europeans to halt financial aid to the Palestinian Authority. Someone even wondered whether you would be willing to give up the aid provided for Al-Quds University.

"Ramallah's reaction was a bit worried. They called me a few times, a bit worried."

Nusseibeh adds that the PA is still dogged by corruption - different from the corruption of which Olmert is accused - whereby donor states subsidize thousands of salaried employees at nonprofit organizations. This creates what he sees as an unhealthy dependency on foreign entities.

"We have a terrible situation. Our political bible, our platform, our moral values - we need to be brought together again. If not for creating a state, then for our own sanity and for own values as a people. Apart from in Ramallah, everybody is living under very bad conditions. The occupation is terrible. The siege is everywhere. Pressure. As it is, the Europeans are financing the occupation. And the Europeans are happy, because they feel they're doing something, it cleans their conscience. And the Israelis are happy because they're not paying for it. And the Palestinians are happy because they are getting their wages paid. It keeps the economy going, and people are getting complacent about it. It's dead money [going] after dead money."

Nusseibeh mentions the recent meeting he had with British Prime Minister Gordon Brown at the British consulate in Jerusalem, together with four other Palestinians, during which the premier stated he would like to assume a role in the peace process more central than that of a cash register. "I said, I want to tell you what you can do to transform yourself from a payer into a player: Make your money payments conditional on tangible progress in the peace process."

Not long ago, the professor continues, "I was in Brussels. I gave a talk and I said to the Europeans: If you want to pass on money, do it only on the condition we build a state, in which case it makes sense for you to spend money to build us an international airport. But if in the end there isn't going to be an independent Palestinian state, why waste your money? Waste your money, if you need to, on integrating us into Israeli society. Makes more sense. Pay the money for us to become part of Israel, to have equal rights. Raise our level of education, bring our standards of living up. But to have the PA taking all this money, creating all this debt, makes no sense. Maybe the Europeans should link the aid they are giving us to real progress in peace talks, so that both the Israelis and the Palestinians will be shocked out of their complacency, or lack of commitment."

What do you make of the growing support among Palestinians for the dismantlement of the PA?

"The PA has no use. If we fail to reach a peace agreement by the end of this year, I believe it would be best to go back to the period when we were living happily under occupation. We had a small civil administration, they were paying back some $20 million a year to the Israeli treasury, so they were making money off us. Today, we are creating, year after year, bigger deficits. We are spending billions, we have 160,000 employees, half of them are security personnel, who give us no security whatsoever, we are spending masses of money on guns, which we only use against each other and which provide us no security. The whole thing is a mess."

Nusseibeh says that to this day, the Palestinians have opposed taking part in the Jerusalem municipal elections because they feared doing so would sever the link between Jerusalem's Arabs and the Palestinians in the West Bank and Gaza. Now, given the diminishing likelihood of a two-state solution, perhaps it is time for the Palestinians to reconsider.

"People in Jerusalem - why should they attach themselves to the Muqata, to Ramallah? There is no reason. There's nothing. The municipal election in Jerusalem [could serve as a launching point for seeking equal rights in a binational state]. We begin with Jerusalem, not as a separate part, but as a spearhead of the entire Palestinian body. Why not? Why not turn the weakness into a strength?

Are you disappointed by the Israeli peace camp? Did your partner, Ami Ayalon, who joined the same government you now accuse of distancing itself from your proposal, betray you?

"I respect Ami Ayalon. He is a very honest person, that is something that has always attracted me to him. It is not a betrayal of me personally. I look upon it as the ultimate submission by the individual to the wheels of history. You reach the point where you feel no longer able to do what you want, to steer the wheels in the direction you want them to go. And you submit, and become a part of the machine. So it's not really a betrayal. It's rather an expression of weakness. I am sad more than surprised. I recognize it as part of human weakness.

"I was still hoping because, before he went to the Labor Party, he came and spoke to me. I like this about him. I knew what he was doing. People were pushing him for a long time, trying to get him into the system, and he resisted. But then at one stage, I think he made up his mind: 'Maybe I can lead the Labor Party, and then this is the best place for me to be.' I said, fine, do it. I was unhappy that ... he became marginalized as minister without portfolio."

Nusseibeh says he lost touch with Ayalon since the latter became a minister.

Asked if Abbas would be able to muster Palestinian support for an agreement like "The People's Choice," Nusseibeh says both the Palestinian president and Olmert need to courageously take on their respective opposition camps. For instance, if Abbas "would come to the Palestinian people and say, 'I initialed such a document. I want to dissolve the legislative council and run for election and this is going to be my political platform. Not only for me as a president, but also as leader of Fatah.' Let us assume that he does this and then he creates a debate in our society. It will be a very far-reaching, democratic debate, in which he will be looked upon as presenting his project. [This would] mark the beginning of a process, of a struggle.

"I believe that on Israeli side, Olmert could do the same. We don't know whether both leaders will be reelected, but it's worth doing, even if they're not, because at least we know we've given this peace agreement a chance."

Ami Ayalon says, in response: "I agree with Sari Nusseibeh that time is running out for the two-state solution. He voices the frustration and desperation of the Palestinians, and we have to consider that. If a man like him, a son of a Palestinian refugee who relinquished his right of return and was bodily attacked because of it, comes to the conclusion that the two-state solution is no longer an option, it means that the whole pragmatic Palestinian approach is crumbling.

"I share his view that Olmert missed a chance to get an agreement due to efforts to insure his own political survival. The Labor Party will not succeed in getting back in power by attacking the other parties, but only by raising the common banner of security and political agreements."