For the time being, the United States has mercifully stopped the embarrassing haggling about the settlement freeze. While Obama’s administration officially says that it will continue to look for ways of reviving the peace process, it is probably realizing what has been fairly clear since Benjamin Netanyahu chose to form a coalition with his "natural" partners, Avigdor Lieberman and Shas: this government is unable and unwilling to deliver an agreement with the Palestinians.

This is precisely the Palestinians’ moment of truth. For a century they have felt that they are victims of history and not agents. The tables are turning now, because at this point, there is only one practical strategy to break the deadlock: Salaam Fayyad’s plan of declaring Palestinian statehood in 2011 and seeking international recognition for it, while implementing de facto sovereignty over the territories already under Palestinian control. Recent developments, like the recognition of Palestine by Brazil, Argentina and Uruguay, as well as the EU’s declaration that it will recognize a Palestinian state at a suitable moment, show that Fayyad’s strategy stands a good chance of succeeding.

Palestinian PM Salam Fayyad speaking to the media in Ramallah, August 30, 2010.

Photo by: AP

This could mean that the Palestinians could be on the way to correct their historical mistake of rejecting the UN partition plan for Palestine in 1947; a mistake that has cost them decades of terrible suffering. But they must make sure that their strategy will allow a future Israeli government that will replace Netanyahu’s current extreme-right coalition to engage with the Palestinian peace plan.

They must state explicitly that the establishment of Palestine along the 1967 borders would end the conflict. Most importantly: while they would want moral recognition of their tragedy of 1948 and some form of restitution to the refugees of 1948, they should accept something along the peace plan of Yuval Rabin , which states that the right of return will not be implemented except in a few symbolic instances.

Quite unfortunately, there are indications that the Palestinians may continue their unfortunate tendency never to miss an opportunity to miss an opportunity. In a recent article in the Guardian, Saeb Erekat wrote that the Palestinian right of return is a central issue, and went on to say that, “Israel's recognition of Palestinian refugee rights and its agreement to provide reparation and meaningful refugee choice in the exercise of these rights will not change the reality in the Middle East overnight, nor will it lead to an existential crisis for Israel.”

Akiva Eldar and I have written a rejoinder in which we express our disappointment at Erekat’s formulation. We would have expected more political wisdom from the Palestinian chief negotiator. His statement plays into the hands of Israel’s right, which has claimed for decades that the Palestinians will never accept Israel’s existence. He cannot possibly say in good faith that the idea of the realization of the Palestinian right of return “will not lead to an existential crisis for Israel”. The option of millions of Palestinians settling in Israel would mean no less than the end of the Homeland of the Jews.

It needs to be clear that even liberals like Akiva Eldar and me, who have been for a Palestinian state since long before the PLO and Israel ever talked to each other, have red lines that we will not cross. While we can understand the Palestinians’ need for recognition of their suffering and Israel’s partial responsibility for it, and the desire for some form of restitution, actual return of Palestinians in large numbers into Israel inside the 1967 borders is not an option we, like all Israelis, can live with.

The deepest reason most Israelis are weary of signing a peace agreement with the Palestinians is that they don’t believe that such an agreement will guarantee Israel’s long-term security and survival. They are afraid that the two-state solution is really a two-stage solution; that once a Palestinian state is established within the 1967 borders, the Palestinians will continue to demand the right of return to the State of Israel. As a result, Israel would not receive final legitimacy from the Arab world while losing the negotiating chip of the settlements; and the Jewish homeland would continue to be under threat.

Through the demand to actually implement the Palestinian right of return, as Erekat seems to be implying, Palestinians condemn themselves, Israel and the whole region to further decades of violence, trauma and enormous suffering. Their theory that Jews in Israel will ultimately renounce the idea of a Jewish homeland is wrong. Against the backdrop of twentieth century history, Israel will fight for its existence to the bitter end.

I don’t expect empathy from Palestinians for Jewish history, and they don’t need to identify with us to realize that there are but two choices: the two-state solution, or descent of the region into chaos that will make earlier rounds of bloodletting look tame.

The Palestinians must realize that Israel’s political system and its collective psyche are frozen in paralysis. With all of Israel’s military might, and its remarkable technological and cultural creativity, little should be expected, at least from the current government, in terms of political courage. While to the world Israel is the stronger party in the conflict, the paradox is that, at this point, it is up to the Palestinians to determine the future of the region.

If they now try to capitalize on their international advantage to push for the implementation of the right of return, they will repeat their historical mistake of 1947, and once again reject the partition of the area west of the Jordan River. It is to be hoped that instead they will follow Salaam Fayyad’s lead and choose a life of dignity, peace and freedom alongside Israel.