The US admission that it has given up on securing an Israeli settlement freeze, coupled with Latin American's growing support for Palestinian statehood – with or without a peace deal – has pushed the faltering Israeli-Palestinian peace process to the brink.

Late yesterday, a senior US diplomat said that the Obama administration, which had made a settlement freeze the kingpin of its peacemaking efforts, had dropped its bid to secure a second moratorium from Israeli Prime Minister Benjamin Netanyahu, whose right-wing coalition partners had strongly opposed such a measure.

Argentina on Monday followed Brazil in recognizing a "free and independent" Palestine, handing Palestinian Authority President Mahmoud Abbas a symbolic victory as peace talks appear to unravel. Uruguay has promised a similar declaration early next year, and Chile, Paraguay, and Peru are also expected to follow suit.

While Latin America's support may be a boost to Palestinian morale, some analysts say the recent recognition letters from Argentina and Brazil are symptomatic of an Israeli-Palestinian peace vacuum that needs US intervention. Washington, they say, should reassert itself by issuing a plan that will force the sides back into bilateral peace talks.

"The Palestinians are moving ahead with the creation of the state, and an important part of the world is collaborating with them,'' says Gershon Baskin, co-director of the Israel Palestine Center for Research and Information in Jerusalem. "If the assumption is that the Israelis will oppose unilateralism, there is a danger of a breakdown, which calls for US intervention of some kind or another. The US cannot allow this process to spin out of control.''

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Palestinians skeptical of US clout now

The Obama administration has been unable to bring the sides back to negotiations since Israel ended a 10-month moratorium on settlement housing starts in late September, prompting the Palestinians to suspend talks.

US-Israel talks on a three-month extension of the moratorium seemed close to conclusion several weeks ago, but the sides haggled over a package of incentives including $3 billion in military hardware to help Prime Minister Netanyahu sell it to his coalition.

The official declaration yesterday that no such moratorium would be forthcoming has left the Palestinians, which have yet to respond publicly, mulling their options. A prime consideration, suggested a top aide to Mr. Abbas, was whether the US could deliver meaningful results for the Palestinian Authority.

"We will assess if the US would be able ... to achieve success in its upcoming efforts," Yasser Abed Rabbo was quoted as saying on the Voice of Palestine radio station.

"The one who couldn't make Israel limit its settlement activities in order to conduct serious negotiations, how can he be able to make Israel accept a fair solution," he added. "This is the big question now."

Unilateral declaration of statehood?

The Palestinians, meanwhile, are considering a unilateral declaration of statehood, perhaps by requesting resolutions from the United Nations General Assembly or Security Council.

Resolutions from individual countries, though symbolic, are seen as a step in that direction. In addition to a letter of recognition from Uruguay early next year, Palestinians are hoping to win recognition from additional South American countries including Chile, Paraguay, and Peru, said a Palestinian official involved in the effort.

"The recognition for the Palestinian state on the 1967 borders is essentially an insurance policy,'' says the official, who requested anonymity because of the sensitive negotiations. "We Palestinians have to protect the borders of the Palestinian state.''

State Department spokesman P.J. Crowley said that Argentina's statehood recognition was "counterproductive," and that only through negotiations can the sides resolve problems. Israel criticized the move as well.

US peace plan could discourage unilateral action

A US peace plan, proponents argue, could pull both sides away from any unilateral moves that could undermine the Obama administration's push for an Israeli-Palestinian peace deal.

"The best way for the US to head off a Palestinian unilateral move for recognition is not to warn them, as Washington has done, but instead to step forward with our own peace plan,'' says Scott Lasensky, a fellow at the Congress-funded US Institute for Peace who coauthored an article in the International Herald Tribune (IHT) supporting a peace plan. "A US plan would capture the debate and change the focus to the terms of peace."

In order to resuscitate the current talks, some analysts believe the US should consider compiling its own set of "principles'' regarding the major planks of a peace accord – borders, Jerusalem, Palestinian refugees, and security arrangements.

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Those principles would likely strike a middle ground between the two sides' negotiating positions. Many observers expect that the US principles would be similar to the set of "parameters'' made public in January 2001 at the tail end of former President Bill Clinton's term.

Others say a new US plan should include the progress achieved in 2008 when the administration of former President George W. Bush presided over talks between Abbas and former Israeli Prime Minister Ehud Olmert.

"It makes no sense for new negotiations to start with a blank page. Palestinians will not accept new Israeli positions that are different from those presented in previous negotiations and it would be an exercise in futility to do it this way,'' says Khalil Shikaki, a prominent Palestinian public opinion expert, in an e-mail. "The US role should be to maintain a record of progress and update it as negotiations move along.''

A risky tactic

Advocates and critics acknowledge it’s a risky tactic that would require an even larger investment of political capital to get the sides to discuss the plan. Moreover, Israel's conservative government is likely to resist a far-reaching peace plan that would put it at odds with its supporters.

The introduction of a peace plan is only appropriate after the gaps between the sides have been narrowed by negotiations, says Yossi Alpher, coeditor of the Palestinian Israeli opinion website Bitterlemons.org. What's more, he adds, the Obama administration hasn't gained enough credibility with either side.

"It would be foolhardy. The gaps are too wide,'' he says. "It would create a crisis atmosphere… I assume the US would present a proposal and ask the sides to come and discuss it. But you are back at square one. Where does this get you?''

Best alternative for now

US peace plans have been rare since the 1967 war, in which Israel occupied the West Bank and Gaza. But proponents say that right now it’s the best alternative to continuing with the current talks on a settlement freeze or leaving the sides to their own devices and focusing US efforts elsewhere.

Samuel Lewis, a former US ambassador to Israel who coauthored the IHT article with Mr. Lasensky, says he's been skeptical until now of such a course of action.

"I've become convinced because we're in such a difficult stalemate,'' he says. "The Obama administration needs to step back, and it might be useful for it to nail its conviction on the wall, so it will help the parties do some thinking. It's conditions we can stand on instead of being nickel and dimed.''