At a time when neither Palestinian nor Israeli domestic political conditions are conducive to progress on peacemaking, the region is looking to the new US administration as the only source of hope.

It is evident that the strategies and approaches of the previous American administration contributed, at least in part, to an unprecedented deterioration in the region, including for the Palestinian-Israeli conflict.

The lack of any prospect for a peaceful negotiated solution to the conflict contributed to a shift in the balance of power among Palestinians in favor of radical Islamic groups on the basis of their opposition to a failed peace process. By the same token, among Israelis the absence of a serious driving force for peace based on respect for international law encouraged the supporters of "Greater Israel" and continued occupation and settlement expansion.

Meanwhile, the failure of US strategy on other Middle East issues, including Iraq and Iran, as well as the democratization drive, affected the credibility and influence of the US in the region and led to Arab divisions while increasing the influence of Iran and its allies.

However, since the election of Barack Obama, the region has seen hope for change in the American approach that might affect Palestinian-Israeli relations. The appointment of George Mitchell as Middle East peace envoy increased expectations that President Obama not only holds a different position from the previous president but is also serious in trying to effect change.

In parallel, the administration has been changing US rhetoric on other Middle East issues, all of which are interrelated. The intention to withdraw from Iraq together with the inclusive approach toward Iran and the rest of the Muslim world beyond the traditional "moderate" camp--which did not prove particularly efficient--have engendered hope and encouraged the public to give the new administration a chance.

The main challenge to Obama is to achieve a renewal of a political process between Palestinians and Israelis and ensure a cessation of Israeli settlement expansion. More and more experts and diplomats in Washington seem to have begun to perceive the Israeli settlement policy as the main barometer of Israeli intentions.

The Obama administration needs to set itself apart from the previous one by moving from rhetoric such as the "two-state vision" to practical changes that allow such a vision to materialize. There is no credibility in talking about two states as long as Israel continues to undermine the very possibility of two states by expanding settlements. Hence, the Palestinians and the Arabs, together with the peace camp in Israel and the rest of the international community that has an interest in peace in the Middle East, will judge the Obama administration on its ability to convince or pressure Israel to stop the expansion of settlements, as a first step toward reversing the settlement process and indeed the Israeli occupation of territories occupied in 1967, including East Jerusalem.

Obama also needs to encourage Palestinian unity while restoring some credibility to the Palestinian leadership. That credibility has been gradually and steadily eroded by having to play a security role in preventing resistance to the Israeli occupation even as this occupation has been actively colonizing more and more occupied territory.

Three developments are strongly inter-related: the consolidation of the occupation, the failure of the peace process and the weakening of the peace camp in Palestine. Hence, these three trends can also be reversed together. Doing so will depend on a new understanding and approach by the Obama administration to the Palestinian-Israeli conflict within its larger Middle East political context.-