To one side stood Sen. Joe Lieberman, the former vice presidential candidate. To the other stood Rep. Howard Berman, the chairman of the House Foreign Affairs Committee. And as these two staunch Jewish supporters of Israel nodded their encouragement, the Palestinian Authority's Prime Minister Salam Fayyad explained at a press conference in Ramallah on Sunday precisely how he was preparing the Palestinians for statehood.

"The proclamation of statehood is for the PLO to decide, at the right time, in due course," the compact, dapper Fayyad declared, neatly sidestepping this week's controversy over plans by his boss, PA President Mahmoud Abbas, to seek new international backing for Palestinian sovereignty everywhere beyond the pre-1967 lines.

The task of the PA, Fayyad went on, is to "ensure effective, corruption-free institutions, building a state that lives up to the aspirations of its people. When we approach it this way, we stand a good chance of getting the support of the international community."

Within two years, Fayyad concluded, the goal is "to have strong and competent institutions of state that will make the issue of state proclamation a formality."

Brisk and understated, Fayyad cuts an impressive figure, but it is his achievements over the past two and a half years as prime minister that have impressed members of the international community - Israel and the United States emphatically among them.

The Israeli security establishment affirms that the 2,200 members of the PA's Jordanian-trained security forces are coordinating more effectively with Israel than was ever previously the case, and performing more efficiently in bringing law and order to Palestinian cities.

The PA forces, Israeli officials stress, got serious not because of any love for Israel, but because of Fatah's fear that Hamas's summer 2007 coup in Gaza would be replicated in the West Bank. But under Fayyad's direction, they also acknowledge, those forces prevented Operation Cast Lead from provoking heavy disturbances in the West Bank, and are now showing increasing readiness to tackle hotbeds of violence and terror, including in previous refugee camp no-go areas.

In that context, Fayyad's constant appeals to Israel for the PA forces to be given wider areas of responsibility, and to deploy beyond the cities, are being met with increasing sympathy by certain prominent Israeli officials. Likewise his calls for the IDF to reduce the frequency with which it sends its own forces into the West Bank cities. Fayyad is anxious that his own people not come to regard the PA forces as subcontractors helping to secure Israel, but rather as the protectors of a nascent Palestine.

The Americans are completely won over. "We've waited decades to hear and see a Palestinian leader like this," a prominent American visitor observed to me this week. Some $161 million has already been spent on the PA forces, trained under the auspices of Lt.-Gen. Keith Dayton, and another $131m. is in the pipeline. By April 2011, if the training continues as scheduled, there will be eight PA National Security battalions and four Presidential Guard battalions, plus police.

Fayyad's second highly regarded achievement is in his specialist field, the economy. Official figures suggest that the West Bank economy is growing by some 7 percent, but the PA believes the figure is actually double digits, and that it can continue to grow in double digits for years to come - benefiting in good part from the current Israeli government's removal of two-thirds of the major West Bank checkpoints and a radical easing of freedom of movement.

Here, there is plainly a personal element to Fayyad's credibility. His former boss at the International Monetary Fund, Stanley Fischer, just happens to be the immensely well-regarded governor of the Bank of Israel. Treasured by Prime Minister Binyamin Netanyahu long before his astute handling of the Israeli economy through the global recession, Fischer in turn doubtless vouches to Netanyahu as to the economic acumen, and overall good intentions, of Fayyad.

In Ramallah on Sunday, Joe Lieberman could hardly have given Fayyad firmer backing: "The Palestinians are creating facts on the ground," Lieberman said admiringly, having registered the massive scale of construction taking place throughout Ramallah. "Once the institutions of state are built up, there is greater confidence in the political process." Overall, he said, "We'll send back a positive report on how US money is being spent."

But it was Berman whose short comments underlined the seismic change since the era, after the Karine A arms ship to Gaza was intercepted in January 2002, when the PA's leadership, led by Yasser Arafat, was cold-shouldered under president George W. Bush. "The US-Israel bond is unbreakable," Berman began, "but that feeling in no way precludes our commitment to Palestinian statehood and an end to occupation.

"We can support that goal most effectively when the Palestinians take steps to help themselves," concluded Berman. And under Fayyad, Berman had evidently determined, that is precisely what is happening.

IN RAMALLAH, day by careful day, Salam Fayyad is building a Palestinian state.

Even as the negotiating process remains deadlocked; even as the Israel-US-PA disputes over settlement refuse to die down; even as Israel complains that Fayyad's boss, Abbas, first begs the IDF to destroy Hamas in Gaza then sues it for war crimes; even as Hamas retains its grip on Gaza and rearms through the hundreds of reactivated smuggling tunnels from Egypt - even as all that continues, Fayyad is quietly, steadily, methodically building a Palestinian state.

And he is steadily building widespread international support for statehood too - not solely from the automatic backers of a sovereign Palestine, the 100-plus nations that recognized the state that Arafat theoretically declared 21 years ago. But also from Western nations, from nations committed to Israel's well-being. And first and foremost from the United States, where the advent of Fayyad now brings the most reliably pro-Israel politicians like Lieberman and Berman to the point of open, enthusiastic support.

Back in Jerusalem from Ramallah that same Sunday evening, the American political visitors and their colleagues in the prestigious Saban Forum of the Brookings Institution congregated at the David Citadel Hotel to hear Netanyahu speak and, before him, former US president Bill Clinton.

Netanyahu stressed his fervent desire to reopen talks with Abbas and the PA right away. He expressed a willingness to make "generous concessions in exchange for a genuine peace" and spoke of the need for courageous Israeli and Palestinian leadership. Even though his foreign minister and some of those closest to him in the Prime Minister's Office profess no particular concern should Abbas remain in his current funk - refusing to negotiate, threatening to "go home" - the prime minister reached out to Abbas, insisting that he wanted to negotiate not for the sake of it, but to put an end to the conflict.

His aides, offering off-the-record interpretation, were adamant that the prime minister truly wants to make peace and truly believes it can be done if Abbas steps up.

If, indeed.

Others, both around Netanyahu and connected to the previous Olmert government, observe that the former prime minister offered Abbas almost all the territory, a divided Jerusalem, and wider peace in the framework of the Arab League initiative. And Abbas said no.

Around Netanyahu it is further asserted that Olmert's offer was irresponsible, and that he hadn't conducted the necessary assessments to ascertain where precisely Israel could afford to compromise. The current prime minister - who also used his speech to highlight the critical need for security arrangements to prevent the West Bank turning into another well-armed terror state - could and would offer significantly less territory than Olmert had done. Why, since he had rebuffed almost everything with Olmert, would Abbas agree to significantly less with Netanyahu?

THE COMPLICATIONS don't end there. However wide the support for Fayyad in the international community, he has no political base in the West Bank. If he falls, there is no replacement. If he falls, what becomes of the PA's economic revival? And, of paramount concern to an Israel much-bloodied by previous confrontations with armed Palestinians, what becomes of all those well-trained security personnel?

Furthermore, a swap looms for captured IDF soldier Gilad Schalit, with the release of hundreds of Palestinian prisoners - a deal this government feels honor-bound to implement if at all possible, even though it wants to put an end to such asymmetrical "exchanges" in the future. Such a deal would dramatically boost Hamas, in Gaza and in the West Bank, reducing the prospects of Fatah success in any future Palestinian elections.

Netanyahu, those around him say, values Fayyad and doesn't want to see Abbas depart. But whether or not he has the domestic coalition support, he's balking, for now at least, at implementing the immediate full settlement freeze that the US was demanding and that Abbas has now made an iron condition for resuming the peace talks. And although he has greatly eased freedom of movement in the West Bank, he has balked too, to date, at the idea of widening the deployment of the PA forces and further reducing IDF activity in PA-controlled areas. He is also resisting easing the blockade of Gaza - another step urged by some influential Israelis and Americas that, it is suggested, would reduce Gazans' dependence on the Hamas-controlled smuggling industry and thus bolster Abbas.

Clinton, in a few astute minutes, sketched out many of the challenges to resolving what, unless I misheard, he described as "the difficulty with the Palestinians." Telling Israel that "you shouldn't think Obama is your enemy," he also acknowledged that Israel had to know, when contemplating the concessions involved in any Palestinian deal, "that if it all went straight to hell, we'd be there." That's a feeling that Obama, again blisteringly critical of settlement expansion this week when news broke of new building in Gilo, has not successfully inculcated among most Israelis.

But Clinton also made plain that "no US president, given what Abbas and Fayyad are doing in the West Bank, is going to not want to speed along... We see this as good for you."

If peace could only be achieved, the former president enthused, "the whole future can be different. I can see the whole Middle East economy shifting - Israel, the Palestinians, Lebanon, the Gulf states. You can rewrite the future!... You were born the chosen people. You should become the choosing people. Choosing the things that have to be done here."

But ex-presidential enthusiasm can only take you so far. And a PA prime minister's security and economic reforms can also only take you so far. Along the road to be traveled, you still face a buoyant Hamas gradually rebuilding in Gaza, and a gulf between Israel and the PA that even the desperately flexible Olmert could not bridge.

Palestinian supporters of a two-state solution, like Fayyad, know full well that most of the international community completely supports their demand for a 100% Israeli withdrawal from the West Bank, give or take certain one-for-one land swaps. Yet Netanyahu, for his part, is intent on driving a harder territorial bargain than the failed Olmert parameters.

Finessing that gap would appear to be a case of reconciling the irreconcilable. "That's where we're supposed to come in, is it?" a senior American official said to me this week, in tones that strongly suggested: Forget it.

FAR MORE likely, indeed, is that the impossible differences will remain unresolved. And that if Fayyad survives for another couple of years, and presides over an increasingly stable West Bank, talk of unilateral declarations of Palestinian statehood will no longer be shrugged off by key international players, including the US.

"I don't think anybody is talking about a unilateral declaration of statehood at this point," Joe Lieberman said in Ramallah on Sunday, with Fayyad at his side.

Oh, but people most certainly are. And an America increasingly won over by the Abbas-Fayyad PA may not stay deaf to those calls forever. After all, the US will argue - and many Israelis will agree - fewer and fewer Palestinians are eager to establish a state "merely" everywhere beyond the pre-1967 lines. Their sense that demographic trends are working to their advantage, that America is weakening and Iran becoming emboldened, and that Israel is losing both international support and military peerlessness, indeed, means that Palestinians are moving away from the idea of a two-state solution toward the prospect of a single, Palestinian-dominated binational state between the river and the sea.

In US eyes and, again, in the eyes of many Israelis, therefore, Salam Fayyad, the Stanley Fischer protégé transforming the West Bank with no real domestic political base, is fast becoming the best, last hope Israel has of attaining a viable, two-state accommodation.

There is still American, and some international empathy with Israel's frustration that first Arafat, and now Abbas, have rejected its offers of accommodation. But that empathy is dwindling. As Clinton put it, "You need to get this done and you do have partners... The Palestinians... have proven in the West Bank that they can get this show on the road."

If Israel doesn't find the means to partner Abbas and Fayyad to statehood, signs are the rest of the world might do so anyway.