Whether or not a solution to the crisis over settlements is achieved in the coming days, it's becoming increasingly clear that the direct Israeli-Palestinian negotiations are in serious trouble. The Israeli daily Ha’aretz quoted unnamed Western officials as saying the talks are “going nowhere.” And the most cautious, sober and measured of the senior PLO leadership, Yasser Abed Rabbo who is a member of the negotiating team, has been moved to declare that, “there will be no serious political process with Netanyahu's government.”

Most reports strongly suggest that Israeli Prime Minister Benjamin Netanyahu has been unforthcoming on permanent status issues. According to these sources, Netanyahu refuses to meaningfully discuss core question such as borders and insists that security must be the main issue at this stage. This has led to frustration not only among the Palestinians and other Arabs, but in many circles in the West and the United States.

This frustration is amplified by Netanyahu's refusal thus far to accept an exceptionally generous American inducement package in exchange for a 60-day extension to the partial settlement moratorium that expired in September. Indeed, the New York Times called the package “overly generous.” Moreover, it is unclear what the Obama administration expects to be different in two months time, when the parties are likely to find themselves in precisely the same situation. If the Americans have a game-changing approach to unveil over the course of eight weeks, it's the best-kept secret in Washington.

The American hope may be that borders can be agreed in short order, rendering the settlement issue largely moot, but the parties themselves show little sign of believing that. We therefore have to face the fact that negotiations would appear to be both stalled in substance and threatened with a political crisis that may produce a breakdown. It might be possible to keep the ball in the air by returning to indirect negotiations or finding some other temporary stopgaps. But the experience of the past few weeks does not augur well for prospects of any kind of significant success in the foreseeable future.

The prospect of a breakdown again raises the spectre of another intifada, since many Palestinians may conclude that the occupation is either permanent or that diplomacy is simply an ineffective tool in resolving it and that a new uprising is the only remaining way to pressure Israel.

The flashpoints are obvious. Especially in Arab neighbourhoods of occupied East Jerusalem, tensions are running high. Recently a Palestinian man was shot under extremely questionable circumstances by a settler guard, and a 14-month-old baby was killed by teargas fired by Israeli security forces. Numerous buildings and even neighbourhoods are under fierce contention between aggressive settlers supported by both the national and municipal Israeli authorities and Palestinians struggling to cling onto their homes. If another intifada erupts, it may very well begin there.

But it is essential that Palestinians do not turn to, or allow themselves to be sucked into, another round of violence with Israel. A third intifada would undoubtedly follow the pattern established by the relationship of the end of the first intifada to its beginning, and of the second intifada to the first; a process has entailed ever-increasing levels of violence, death and religious fanaticism on both sides. Because of this pattern, the consequences of the second intifada were disastrous for the Palestinian people and national movement. A third is likely to be even worse.

For Israel, a third intifada could well signal the squandering of the last opportunity to divest itself of the occupation in a rational, workable manner, rendering what will become the de facto Israeli state as neither Jewish nor democratic in any meaningful sense and developing and entrenching an apartheid character especially in the occupied territories.

It is imperative that some way is found to keep diplomacy alive, even if it means a return to less-than-optimal indirect negotiations. In the end, both parties have no option but to work towards a negotiated two-state peace agreement or continue with an ever-deteriorating conflict. It is essential that international actors such as the United States, the European Union and the Arab League help find a formula to allow Israel to make restrained settlement expansion, and the Palestinians to make continued negotiations, politically plausible among both of their domestic constituencies.

In the meanwhile, Palestinians should redouble their state and institution building efforts with international support, recently reiterated by both the United States and the Quartet. And they should continue to explore what kind of momentum can be secured to complement diplomacy through non-violent protests, and boycotts of settlement, but not Israeli, goods. Confronting the occupation at every level is essential, but a return to violence, no matter who instigates it, would be a disastrous miscalculation on the Palestinian side.