Some Palestinians have taken up arms and others attend peace talks in their decades-long struggle, but Nadim Khoury has found a third route to statehood - the brewing of delicious local beer. The 49-year-old returned to his native Occupied West Bank village of Taybeh from the US in 1994 with the unusual and ambitious idea of distilling the dream of Palestinian independence into a smooth, full-bodied golden lager.

"Everyone thought I was crazy, they didn't believe me. But I didn't listen to them because I like making beer," says Khoury, who discovered micro-brewing in the 1980s when he was a student in Boston, where he lived for 23 years.

Since the heady early days of the Oslo negotiations, hopes for Middle East peace have waxed and waned, but Khoury's Taybeh brewery has endured as a rare economic success in the heart of the occupied territories.

"It contributes a lot to the economy. I believe this is how we can build a Palestinian state and not wait for US aid. Taybeh is permanent aid," he says.

The malt comes from France and Belgium, the hops are Czech and Bavarian, but the beer is made in a hilltop Christian village in the heart of the Occupied West Bank from which it takes its name - Taybeh is Arabic for "delicious."

It's an unlikely place for a brewery. The gray tower of an Israeli Army outpost stands guard over the main road into the village, one of more than 600 Israeli military checkpoints and roadblocks that restrict the freedom of Palestinians.

When the latest intifada erupted in 2000, Israel laid siege to the entire area, forcing Khoury to smuggle crates of beer into the nearby town of Ramallah on the backs of donkeys.

The situation has improved in recent years, but Khoury still has to frequently surmount the barriers to reach customers in Israel.

"Taybeh has a short shelf life because it has no preservatives. It cannot sit for three or four hours at a checkpoint," he says.

Israel and the Palestinians renewed peace talks at a conference in the US city of Annapolis nearly a year ago and pledged to try to reach a full peace deal by the end of 2008.

But despite promises from all sides to take steps to jump-start the Occupied West Bank economy and the pledge of billions of dollars in international aid, Khoury says little has changed for local businesses.

"I don't like to smuggle beer, I want to trade freely, but where's Annapolis? Where is the treaty?"

Palestinian society - which is over 90 percent Muslim - has been growing more outwardly religious, with the Islamist Hamas movement winning parliamentary elections in 2006 and seizing the Gaza Strip in June 2007.

Taybeh remains popular in the upscale bars and restaurants of Ramallah and mostly Arab Occupied East Jerusalem, but in a nod to rising religious sensitivities, the brewery debuted its first non-alcoholic beer this month.

The label of the new beverage, like the Hamas flag, is green and adorned with Arabic writing. The other beers - Golden, Amber, Dark, and Light - are labeled only in English.

Khoury insists he has never heard any objections from his Muslim neighbors and that he has no shortage of customers: "The population in Palestine is 98 percent Muslim, but everyone drinks beer."