Pity the Palestinians, but pity also the peacemakers whose good intentions inevitably stumble up against the harsh realities of Israeli-Palestinian politicking.

The US secretary of state Hillary Clinton’s retreat from the position that a complete Israeli settlement freeze is a necessary confidence-building measure before final-status negotiations is not new; Barack Obama admitted as much in September. It simply reflects the dead end that US peace diplomacy has reached, and the need to start anew with a different approach.

But Mrs Clinton’s praise for the Israeli prime minister Benjamin Netanyahu as the constructive party after he sabotaged the US peace effort is a bitter pill to swallow for even the most committed of Arab peaceniks – and further undermines the position of an already battered Palestinian partner.

It is no surprise that when the Palestinian president Mahmoud Abbas met Mrs Clinton in Abu Dhabi last weekend he declined her invitation to resume peace talks. Mr Abbas, no charismatic or consensual leader to start with, has been dealt an impossible hand in this affair.

He rules over a bitterly divided and highly dysfunctional Palestinian polity, which weakens his credibility and leverage over Israel, and he needs to look and talk tough in the run-up to the presidential elections in January. He is struggling to recover from the ill-fated, US-inspired decision to defer a UN discussion of the Goldstone report, a precious Palestinian victory on the international scene. His faith in the US has now taken another hit, but he remains vitally dependent on foreign support. So whatever he says between now and then – for example his recent threat to quit politics altogether – can be interpreted as political theatre for internal consumption.

Still, the US, well-meaning as it is, deserves some blame for a shaky and poorly communicated strategy. Mr Obama raised expectations to a high level by demanding a complete settlement freeze. Combined with his Cairo address and the appointment of Senator George Mitchell as US peace envoy, this won him Arab applause but no tangible support. The Arab states have been unresponsive to the US administration’s pleas for help, making the patient Mr Mitchell’s many visits to the region now seem pointless.

The more fundamental problem is not that Mr Netanyahu had no intention of complying, but that the Israeli people rallied behind his uncompromising stance – partly because the US administration botched its outreach to the Israeli public, partly because Israelis saw no Arab reciprocation. Of course, the US administration could have hardly bypassed a newly elected Mr Netanyahu without alienating a large segment of Israeli society, but the encouragement given to US-based pro-peace Jewish organisations such as J Street as a way to gain political capital had minimal impact on a sceptical, Iran-focused Israeli population.

What next? Serious progress, if any, will have to wait for the Palestinian elections, and even they may not provide the needed boost. If Hamas can enforce a boycott of the elections in Gaza, a victorious Mr Abbas would emerge only marginally stronger. It is quite possible that Hamas will do so out of sheer fear of losing the elections, as current polls show they would, so the Islamist organisation will simply invoke its 2006 electoral victory to undermine Mr Abbas’s legitimacy and mandate. Meanwhile, the Israeli government will maliciously (but perfectly understandably) continue to refuse to make concessions to a party that cannot enforce agreements.

How can the Arab states help to build Palestinian leverage with both the US and Israel? They have shown that they will not consider incentives to Israel without unequivocal Israeli concessions, so they could decide to escalate and exact a political cost. By the next Arab League summit, frustrated Arab states may conclude that the only way to press Washington is to formally withdraw the Arab Peace Initiative, or at least threaten to. This is a line advocated by Damascus, although out of revenge and self-interest after priority was given to the Palestinian track over the Syrian one.

Israel has derided the Initiative ever since it was proposed in 2002, but if it is withdrawn they will still argue that this proves a fundamental Arab unwillingness to reach peace. Nevertheless, the rebuff to the US will be unmistakable, and the entire region will have taken a great leap back.

The Arab states can do more to help the West Bank’s economic growth and political stability, but beyond the moral imperative to improve the lot of the Palestinians there is a political dilemma. Israel has proven effective at reaping the benefits of any improvement on the Palestinian scene, without reciprocating. The Israeli calculation is that Mr Abbas will not risk rocking the boat because he would lose foreign support and be outplayed by more hawkish elements within Fatah. Good news, it seems, cannot come from the East.

Mr Obama will have a chance to explain how he plans to proceed when he meets Mr Netanyahu in Washington next week. Nobel prize notwithstanding, the US president’s reservoir of goodwill is emptying, but he remains committed to peace. His first strategy has failed. Now it is time to take stock, and define a new one.