With both the Israeli and Palestinian political systems in shambles, the 1967 peace plan pursued by the West seems a distant dream.

In whatever remains of Palestine, it is no longer surprising to see the two-state solution fading further out of reach. What is surprising is that the US and the Europeans still want to pursue the peace process to adjacent nation-states.

Indeed, this long overdue solution is now extremely hard to defend. Both the Israeli and Palestinian political systems are in shambles. Israel comprises an opinionated far-right mixed with a weak leftist Labour Party, led by Prime Minister Benjamin Netanyahu's Likud.

The Palestinians again postponed a coalition government formula in which Hamas will surely come out with significance influence. In both cases, less moderate political parties have gained popular recognition and are still winning. This does not make for peaceful coexistence.

Of course, some will say that peace is made with your enemies, not your friends. But the territorial reality, the now famous 'facts on the ground' being carried out by Israel, make the 1967 border two-state solution impossible to conceptualise.

East Jerusalem is largely occupied by Israel. Full Israeli military control of Area C from the Oslo Accords includes 60 per cent of the West Bank, including sprawling Jewish colonies, not to mention additional security control of Area B, leaving the Palestinian-controlled cities and towns (Area A) looking like isolated islets.

Access by air-land-sea to Gaza, the three components of territorial sovereignty, is also controlled by Israel. This is already a one-state security system.

And yet, US President Barack Obama has reiterated the diplomatic push to achieve two states, and has appointed a most able peace-maker, George Mitchell, to do so.

Netanyahu has replied in kind, saying that he is prepared to be a "partner for peace".

Speculation about Israel reopening the Syrian track to divert attention from the demise of Palestine is a possibility. But more likely is the continued Israeli appropriation of Palestinian territory, as quickly as it can, before Obama gives an ultimatum.

Focus now shifts to the Saudi-led Arab Peace Initiative (API) in support of two states. The API was launched at the Arab Summit in Beirut in 2002, and reiterated in Riyadh 2007.

Israel responded throughout the spring of 2002 by carrying out Operation Defensive Shield, essentially a reinvasion of West Bank cities, and began construction on the separation/security wall, which cuts deep into Palestinian territory.

In 2007, Israel did not answer the regional call for comprehensive peace with the 22 members of the League of Arab States. It was busy hunting Hamas in the West Bank and in Gaza.

Gaza is different from the West Bank. Separated socially, economically, politically, and geographically from Gaza, the West Bank has religious connotations that carry tremendous political weight in Israel.

It is indicative that the Israeli Ministry of Interior deals with Palestinian issues. It must go beyond token camera shots of Israeli leaders with the the Palestinian President Mahmoud Abbas.

Israel is bound in theory to comply with the 4th Geneva Convention, which calls for the military occupier to provide humanitarian aid to the occupied population.

Only under strong recent pressure supposedly from the US did Israel agree to allow for the passage of basic food products like pasta and red lentils into Gaza. Even then, the benchmark signed by Israel in 2005 of allowing 500 trucks to pass into Gaza every day is a long, long way off.

Ironically, Israel seems to think that complete Palestinian subjugation is necessary to protect its security. But with every camera, every soldier, every satellite, every piece of state surveillance, Israel is further incorporating the Palestinians.

As the two-state solution dissipates further, another reality may be emerging in which Israel and Palestine will become part of the same entity. This does not necessarily mean being part of the same state, but rather enjoying the benefits of participating in opening borders within a regional confederation of states.

The counter-weight of Arab states to the US and Euro-led Quartet pledges in Gaza is important. The unprecedented creation of a 'Gulf Fund' in Gaza is equally important. Further Arab engagement could lead to exploring regional water and wind cooperation, maybe even introduce the use of renewable energy.

This may be a pipe-dream, but this may also be a place for Palestine.