Both Hamas and Israel chalked up victories this week. In Damascus, the Islamic militants got a rare international embrace from Russia President Dmitry Medvedev. In Washington, the Jewish state got about $280 million for weapon system to intercept rockets from Gaza.
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But three years after Israel imposed a blockade on Gaza to weaken the Islamist movement, the two sides are locked in a stalemate – looking not to final victory, but settling instead into a state of mutual deterrence. That has raised fresh debate in Israel among those who say the siege has failed to bring down the Islamist militants, and those who say it's an essential if unappealing tool to contain a group some fear could act as a proxy for Iran in a broader regional war.

"The strategies that Israel adopted to deal with Gaza since June 2007 when Hamas took over have failed,'' says Yossi Alpher, a former adviser to Prime Minister Ehud Barak and a coeditor of the Israeli-Palestinian opinion forum Bittlerlemons.org.

He acknowledges that the near-hermetic seal on commercial trade has brought economic upheaval, but says it hasn't weakened Hamas's hold on power or prompted it to be more open to compromise. Instead, he says, it has undercut a potential counterweight to Hamas: Gaza businesses and professionals.

"Hamas hasn't moderated," says Mr. Alpher. "[The blockade] has impoverished the middle class, which used to trade with us [Israel], and it has empowered Hamas and the tunnel diggers."

But the view that the blockade – jointly enforced by Egypt, which has cracked down recently on the smuggling tunnels along its shared border with Gaza – is boomeranging isn't shared by Israel's government, says Uzi Dayan, an ex-general and a member of Prime Minister Benjamin Netanyahu's Likud Party. There is an acknowledgment, however, among Israelis that the options before them are imperfect and unappealing.

"The most common thing I hear is that there are no good options so far as Gaza is concerned, only varying shades of bad ones," says one Western diplomat who speaks frequently with Israel's security community.

Israel has been hewing to a middle ground between two more radical solutions it is loath to embrace.

Regime change in Gaza runs the risk of Israeli casualties and a resumption of Israeli responsibility for administering the impoverished coastal strip of 1.5 million Palestinians. Engaging Hamas politically before it accepts Israel's right to exist and recognizes past peace agreements would be seen as handing a political and strategic victory to the Islamist movement, which Israel considers a terrorist group. It would also undermine the Western-backed Palestinian Authority in Ramallah.

That leaves the policy of managing the situation with Hamas in Gaza via an unwritten, open-ended truce backed up by a military deterrent (which will be enhanced by Israel's forthcoming Iron Dome intercept system). Both sides observe unspoken rules of nonaggression that yield a measure of calm that is workable on both sides of the border.

"I don't think the blockade hurts [Hamas] that much. Of course it blocks growth and development. In the long run poverty and underdevelopment fuels terrorism, but meanwhile we can't play into the hands of terrorists," says Maj. Gen. Dayan, a former deputy military chief of staff who believes Gaza must be even more isolated to block weapons inflow.

But for now, Israel is tolerating a neighbor which it declared a "hostile entity" that has resumed a weapons build-up with the help of Iran.
Hamas faces critics, complaints, and lack of cash in Gaza

Though Hamas can still lay claim to legitimacy (helped by this week's meeting with Russian President Dmitry Medvedev), it faces an increasingly discontented populace four years after strong voter support brought the group to power in 2006 elections.

Its current modus vivendi in which it has halted rocket fire in return for stability has exposed itself to ridicule from political rivals that it has gone soft on fighting Israel even though Gaza continues to suffer under Israel's blockade.

And even though it remains firmly in power, the failure of Hamas in the last two months to pay in full the salaries of public servants and security officials is a sign that it is being stretched financially. Last week, Arab Bank, the largest banking company in the Arab world, announced a decision to shutter its Gaza branch – one of the last financial links to the outside world. With an economy wholly dependent on external support, some Palestinians have argued that Hamas has taken Gaza down a dead end.

"The reality of Hamas is difficult," says Hani El-Masri, a Palestinian political analyst. "It is besieged, there is no resistance, Egypt has taken a hostile position, there's no prisoner swap [for captured Israeli soldier Sgt. Gilad Shalit], and there's no Arab international recognition."
Still, Hamas has effective veto over peace process

And yet, as long as the status quo persists in Gaza, Hamas has enough political and military power to effectively veto any political agreements reached between Israel and the Palestinian Authority. That may make a convenient argument for those in Israel's right-wing government to fight against the viability of a peace deal. Indirect negotiations, over how to restart talks, picked up this week for the first time since 2008.

For the time being, tolerating Hamas rule in Gaza gives Israel an actor from which to demand security quiet – one which has an interest in preventing domestic chaos. The price is festering violence, a weapons build-up, and the entrenchment of an "emirate'' inspired by the Sunni Islamic Muslim Brotherhood.

"It’s a very long-term process of taming Hamas," says Gidi Grinstein, the president of the Reut Institute, a center left Tel Aviv think tank. "I wouldn't call it a strategy… You could call it a strategy, but I don't think its declared. We can't do it much different."