It wasn’t a white flag of surrender, but it sure seems like the Obama administration is beating a retreat from the Middle East peace process it once embraced with great enthusiasm. Administration officials still talk about working to bring the parties together, but the truth is that neither the Israelis nor the Palestinians seem much interested, and officials here have finally gotten the memo.

Veteran negotiator Dennis Ross dashed the hopes of many at the second national conference of J Street – the self-described pro-Israel pro-peace lobby – when he said that as the winds of unrest sweep across the Middle East, the prospects of progress toward peace are being swept away.

Delegates were disappointed to hear that the administration doesn’t know when or even if Israeli and Palestinian leaders will be ready to sit and talk with each other. Even indirect talks appear iffy.

A similar message also came from the top UN Middle East envoy, Robert Serry, a Dutch diplomat, as he made his rounds of briefings in Washington in recent days.

But the toughest language came from German Chancellor Angela Merkel, whose office leaked the contents of a tense phone call in which she reportedly told Prime Minister Binyamin Netanyahu last week his false statements and failure to keep promises contribute to Israel’s growing international isolation.

According to German sources, she told Netanyahu she was “disappointed” that he had not taken “a single step to advance peace.” She was said to be highly skeptical when he told her he was considering a new peace initiative. Other European leaders are said to share her anger.

One source in Washington suggested Netanyahu is talking to the GOP House leadership about addressing a joint meeting of Congress when he comes here in May for the AIPAC policy conference. His purpose would be to try to portray himself as the peace seeker, and focus international attention on the Palestinians as the obstructionists.

J Street enjoys reasonably good access to the White House, meeting even with the president, and was energized by his early enthusiasm for pushing both parties to the peace table. But after a false start last autumn, the enterprise collapsed.

TODAY THE administration apparently sees the prospects as so bleak it is reluctant to risk any more political capital on active mediation as a difficult election year approaches, especially when so few in Congress appear inclined to back it.

J Streeters were stunned that Ross didn’t speak more about the Israeli-Palestinian issue, and focused mostly on Egypt, leaving the impression that the peace process was being shelved.

“It’s not what he said, it’s what he didn’t say,” one activist told me. “There are more than 2,000 people here who support the administration’s peace policy and want it to succeed. He could have galvanized that support, but failed. He could have said we’re doing everything we can to bring peace, but he didn’t.”

Ross said: “We will continue to press both sides to engage seriously in negotiations” and meetings will continue between the Quartet and the two sides, but even that was vague. In listing the administration’s priorities, “the push for peace between Israelis, Palestinians and their Arab neighbors” was mentioned only in passing, and clearly without the sense of urgency J Streeters wanted to hear.

UN envoy Serry is telling people here that the Palestinian Authority fears the unrest sweeping the Arab world will engulf the West Bank. Palestinian youths are saying they have two lousy choices, Fatah and Hamas, and a not-very-hopeful future. The PA, he said, worries that the youths will rise up against the establishment.

As a result, Prime Minister Salam Fayyad is trying to negotiate a truce with Hamas and head off possible internecine violence, but if the past is any indicator, he will fail.

Meanwhile, President Mahmoud Abbas has retreated to the Yasser Arafat position, minus the violence, Serry reportedly said.

Abbas has decided to bypass direct – and possibly even indirect – talks with Israel in favor of going to the UN with various resolutions, culminating in a recognition of statehood. He knows that this will fail – as Ross warned in his J Street speech – but his real goal is to force the US to table its own peace plan, which he expects will be much closer to his position than Netanyahu’s.

The J Street delegates wanted to hear a rousing call to action by an administration determined to reinvigorate a moribund peace process, but beyond the confines of the Washington Convention Center there seemed to be little enthusiasm for the enterprise