President Barack Obama’s speech Thursday about the Middle East, Israeli Prime Minister Benjamin Netanyahu’s impending visit and Special Envoy George Mitchell’s recent resignation, makes this a unique moment for Washington to set a new Mideast policy direction focused on one goal: a borders agreement.

Rather than view the U.N. General Assembly meeting in September as a threat to derail Middle East peace, Obama could use the opportunity to move both sides forward and promote a return to negotiations on the border before the U.N. vote.

Even as more than 140 nations at the U.N. stand ready to recognize a Palestinian state, Palestinian leaders still indicate the Palestine Liberation Organization’s preference of talking with Israel. But after a prolonged stalemate, each side is reluctant to break away from its deeply entrenched, public position.

While the momentum toward recognition is strong, Washington can capitalize on the historic opportunity offered by the Israelis and Palestinians current vulnerabilities by developing a plan for Israel to applaud Palestine’s recognition rather than be threatened by it.

The road to peace begins with clearly defined borders.

For the Jewish state, this agreement could stem the increasing isolation of Prime Minister Benjamin Netanyahu’s government. It would enable systematic negotiations to begin with settlers living in areas due to become part of Palestine, while construction in areas expected to remain part of Israel could continue. This also allows the Israelis to sustain the status quo on key issues like security.

The approach could also establish a context for greater Israeli-Palestinian economic cooperation, consistent with Netanyahu’s vision of an “economic peace first.”

However, the alternative – a U.N. vote in favor of a Palestinian state which the U.S. and Israel oppose – could unleash what Defense Minister Ehud Barak described as a “diplomatic tsunami,” engulfing Israel in de-legitimizing campaigns and international legal battles against Israel’s “occupation” of a newly sovereign nation.

“Palestine’s admission to the United Nations,” PA President Mahmoud Abbas wrote Tuesday in a New York Times op-ed article, “would pave the way for the internationalization of the conflict as a legal matter.”

An agreement on borders can be built on the prior negotiations. Talks between former Prime Minister Ehud Olmert and Abbas, as well as initiatives like the Clinton Parameters, outline the basic contours of a negotiated borders agreement. Earlier talks have also worked out the principles of a land swap and the size of withdrawal. While final-status issues like the compensation and settlement of Palestinian refugees and Jerusalem still require detailed negotiations, a border agreement could provide momentum for achieving arrangements on all issues.

For the Palestinians, a border agreement allows their considerable investments in state-building and diplomatic initiatives to gain international recognition, paying dividends to the Ramallah-based Palestinian Authority. The Palestinian’s recognize that without Israel’s consent, the U.N. vote will do little to change the reality of life under occupation.

Without negotiations proving that a diplomatic solution can be found, the PA’s credibility could be undermined, and the threat of violence increased. Recent leaks of the Palestinian Papers illustrate the lack of readiness among the Palestinians to compromise on the big issues that require gradual introduction to finalize an agreement.

But, by recognizing external borders first, the Palestinian leadership can have time to prepare its people. This also offers an opportunity to deal with political realties — including the maturation of the Hamas-Fatah unity government and preparations for future elections.

Considering the current turmoil in the Arab world, working together to achieve any agreement could be viewed as a victory. It may remind the international community of the relevance of the current leadership in the Middle East. The governments of Jordan, Saudi Arabia and Egypt — all now confronting tremendous domestic pressure — will directly benefit if such a milestone can be achieved as a result of their support.

For the U.S., a border agreement and recognition of Palestinian statehood would enable Obama to fulfill the remarks he made at the U.N. last September, when he promised, “When we come back here next year, we can have an agreement that will lead to a new member of the United Nations — an independent, sovereign state of Palestine, living in peace with Israel.”

With a borders’ agreement, Obama could achieve this goal without raising expectations that a full agreement can be reached before the U.N. vote. It would also reverse the administration’s failures to make progress in the peace-process. Alternatively, a U.N. vote for statehood against U.S. wishes would enforce the view that U.S. influence in the region is waning.

By welcoming the state of Palestine, the Obama administration avoids clashing with European allies, the Arab League, international organizations and American Jewish domestic constituencies — all of whom may protest U.S. prevention, opposition or support for the creation of the state. The administration can also begin to restore its position as the “indispensible nation” and rebuild its international credibility — as Obama said he would. Obama can use the successful commando raid on Osama bin Laden in Pakistan as the political capital he needs to execute this plan.

Political analysts have long recommended a borders-first approach. But now with recognition of a Palestinian state looming, the U.S. and Israel must embrace it. Each understands that without the support of the other, any renewed initiative will not succeed.

Obama must take the lead, by proposing a borders-first approach and pledging to join in recognizing the State of Palestine, should the effort begin in good faith. Then, Netanyahu can follow the president and offer negotiations that lead to a Palestinian state — and a lasting two-state solution.

The question is not if a Palestinian state will exist, but if the U.S. can help Israel be the first to recognize it.

David Avital is a member of the executive committee of Israeli Policy Forum and the board of advisors of the National Committee on American Foreign Policy.