Benjamin Netanyahu has one great upside and one great downside: the upside is that he is predictable. The downside is that, when it comes to foreign policy, he is utterly one-sided, uncreative and devoid of initiative, as Meir Dagan has recently pointed out.

He is neither ready for a historic compromise with the Palestinians, nor able to deliver anything, given that both his Likud party and his coalition partners live in a parallel universe in which the greater land of Israel is there to stay forever. Hence Netanyahu needs justifications for his inaction. His latest line: Palestinians do not want a state along the 1967 borders, they want the whole thing.

Let’s therefore take a truly realist look at developments in Palestinian society and politics: There are strong indications that Hamas is reconsidering its strategic options. Hamas, for quite some time, has largely refrained from using violence against Israel. Then came the surprise move of reconciliation with Fatah, after years of an uncompromising standoff. And now there are conflicting reports about Hamas’ intention to essentially let Fatah run Palestinian affairs.

There are two ways to understand this: the simple-minded one would say “Hamas only understands violence. Operation Cast Lead finally taught them a lesson”. This would be a big mistake: Henry Kissinger used to say that Israel has no foreign policy, only an internal one. That is pretty much true for all countries and political factions, and it is no less true for Palestinians than for Israel.

A realistic assessment of the reason Hamas is wavering about its long-term goals is simple: the steady erosion of its standing in the last year. Recent polls show that it would get less than 26 percent of the popular vote if elections were held in the West Bank and Gaza, and other polls have given them even less. This is probably the main reason why Hamas refused to participate in the elections that Mahmud Abbas wanted to call early this year.

There are some obvious reasons that have caused Hamas to lose ground: the West Bank’s economy under Salaam Fayyad’s management has seen steady growth of nine percent a year. A robust Palestinian business class is emerging that quietly builds infrastructure ranging from real estate development to cellular networks. Ramallah and Jenin are flourishing with economic activity.

Hamas, on the other hand, is keeping a stranglehold on Gaza's economy and is enforcing religious laws. Unlike their West Bank counterparts, Palestinians in Gaza under Hamas rule have had little reason to rejoice.

In addition to economic progress, the standing of Abu Mazen’s and Salaam Fayyad’s government around the world has steadily improved. A growing number of Western countries are considering recognition of a Palestinian state along 1967 borders, while Hamas remains an international Pariah that is primarily supported by Iran, and is about to lose its strategically important foothold in Syria.

Does this mean that Hamas is about to fall in love with Israel? Obviously this is not the case; but this is the wrong question to ask. There is very little reason to believe that Mahmud Abbbas loves Israel; or that Salaam Fayyad does for that matter. In fact, Israel’s persistent question asking whether the Palestinians have truly come to accept Israel’s existence is simply wrong-headed.

It is quite paradoxical that our right-wing tough realists grow strangely soft when it comes to Arabs’ relation to Israel: for some reason our hardliners keep asking whether we are really loved in the Middle East, and they will settle for nothing less.

Palestinian society is in transition on two issues: one is that its national ethos, for decades, has been to settle for no less than a return to Jaffa, Acre and all the other places from which they were expelled in 1948. The second is its ethos of resistance against Israel. For decades now, the Palestinians have used the dichotomy of resistance versus collaboration used in France under German occupation.

Fatah’s pragmatism requires a difficult transition: a profound change in Palestinians’ long-term aspirations; and the realization that the ethos of opposing Israeli occupation with violence has long ago stopped serving them. Mahmud Abbas’ admission last year that the second intifada was one of the Palestinians’ worst mistakes was an important step in this direction. Indeed, without this bloodbath, Palestinians would probably have a state by now, and thousands of lives could have been saved.

In the end, Palestinians will not change their ethos and aspirations because they love Israel, but because of their long-term interests. They are beginning to see that the international community’s consensus is that they should have a state along the 1967 borders; they know that the Arab world thinks the same, and this is why Abbas and Fayyad have been consistently working towards this goal.

The question is what conclusions Israel draws from this. The likes of Boogie Yaalon, Danny Danon, and Benny Begin say “Well, the good old Jabotinsky doctrine that Arabs only understand force has been proven right. We got the Palestinians off 1948; now we need another fifty years to make them forget about 1967, and the greater Land of Israel is ours.”

No wonder they keep quoting Jabotinsky, who, after all, developed his doctrine when Europe was still expanding its colonies and any non-European populations were largely considered as primitives that needed to be ruled rather than human beings with the same needs and right to dignity as Europeans.

They haven’t realized that the world has moved into a very different era; that Europe has divested itself of all its colonies after WWII, and that nowadays human rights are universal: the Palestinian right for self-determination is no longer questioned by anybody except Israel’s right wing. Their understanding of the world is roughly half a century out of tune with moral and political reality. Israel, meanwhile, is paying the price for their twisted and archaic worldview.