The Palestinians’ bid for statehood at the United Nations has shaken up Mideast peace efforts, fueling a sense of crisis among Israeli and Palestinian allies that the U.S. says can drive a return to direct peace talks.

“We know that there’s a trust deficit that needs to be overcome,” Michael Hammer, acting assistant secretary of state for public affairs, said yesterday. The two sides “have an opportunity here that we hope they will seize.”

A 30-day clock began ticking Sept. 23, when the U.S., the UN, the European Union and Russia -- the so-called Quartet for Middle East Peace -- called on both sides to meet within a month, submit comprehensive proposals within three months and commit to a peace deal by the end of 2012.

The Obama administration is portraying the Quartet statement as giving both sides political cover to step back from hardened positions and resume peace talks that broke down a year ago.

“We all have a shared and common objective of having two states living side by side in peace and security,” Hammer said. “The question is, how can we get there: Are the leaders of each country willing to take the personal, political risks to achieve peace. We’re going to be very much working in the coming days to try to bring that about.”

The UN Security Council tomorrow plans to begin consultations on Palestinian Authority President Mahmoud Abbas’s application for UN membership for an independent state comprising the West Bank, the Gaza Strip and Israeli-annexed east Jerusalem -- territory Israel captured in the 1967 Six-Day War.

U.S. Veto

The prospects for the request are dim because the U.S. plans to veto the resolution if necessary, an action that could strengthen Palestinian militants.

Abbas says the Palestinians, lacking statehood, are at a disadvantage in any talks with the State of Israel. The U.S. and Israel say the statehood issue should follow direct talks to settle borders, security and other disputes.

While both sides say they favor peace talks, Abbas has said Israel must freeze settlement construction and hold talks based on 1967 boundaries, as has been the basis for previous negotiations. Israeli Prime Minister Benjamin Netanyahu wants the Palestinians to recognize Israel as “a Jewish state.”

The Quartet statement didn’t resolve those issues. It declared that talks should resume without preconditions.

Doubts About Progress

Two U.S. officials who spoke on condition of anonymity acknowledged that the Quartet statement may not have provided detailed enough terms for the two sides.

The Palestinians object to recognizing Israel as a Jewish state because they say that would undermine Israeli Arab citizens as well as rights they assert for Palestinian refugees. Netanyahu, in his address to the UN General Assembly on Sept. 23, said a return to 1967 borders would endanger Israeli security.

One positive outcome from the Palestinians’ UN bid was restoring a sense of urgency to the peace process, overshadowed by Arab Spring uprisings.

“In many ways, more good has come out of it than bad,” said Shibley Telhami, a nonresident fellow at the Brookings Institution, a Washington research institute, and a former adviser to the U.S. mission to the UN. “It has created a diplomatic crisis that once again put this issue of Israeli- Palestinian peace at the top of the international agenda where it belongs.”

‘Short-Lived Celebration’

The appeal of statehood among Palestinians boosted the waning popularity of Abbas and his secular nationalist Fatah Party and put rival militant group Hamas, which espouses Israel’s destruction, on the defensive, Telhami said. The U.S., Israel and the European Union regard Hamas as a terrorist group.
Still, for Palestinians “it’ll be a short-lived celebration because nothing concrete was accomplished,” cautioned Leslie Campbell, director of Middle East programs for the Washington-based National Democratic Institute, a non- government organization that supports democratic institutions.

The aftermath of the Palestinians’ UN bid is an uncertain period, said David Makovsky, director of the Middle East Peace program at the Washington Institute for Near East Policy.

By laying out their arguments in high-profile UN speeches, both Abbas and Netanyahu may have “gained the political cover they need” to restart serious talks, he said.

Palestinian Aid

“The question is: Do they use the popularity they’ve each accrued by pivoting to meaningful talks?” he said.

It’s significant that the Quartet statement recognized “the achievements of the Palestinian Authority in preparing institutions for statehood” and promised an international donors’ conference to give them “full and sustained support,” said Hussein Ibish, a senior fellow at the American Task Force on Palestine, a Washington group that advocates a two-state solution.

The U.S. was the largest single donor to the Palestinian Authority last year, providing $740 million directly and through organizations including UN aid agencies, according to the State Department.
Israel’s allies in Congress who have threatened to cut off U.S. aid to the Palestinian Authority fail to realize that undermining moderate Palestinian leaders, who advocate peace with Israel, “will wreck their credibility and could create a backlash of anger and violence” and “a political and security nightmare for Israel,” Ibish said.

Underlying Disputes

The drama at the UN hasn’t changed any of the underlying disputes that divide the two sides nor laid out principles of how to solve them, said Aaron David Miller, a former U.S. negotiator for Middle East peace.

Bidding for UN recognition was “a paradigm shift” on the part of Palestinians, who were trying to break the gridlock of decades of failed talks, said Miller, a fellow at the Woodrow Wilson Center for International Scholars in Washington.

The Quartet’s response was “designed to kick the can down the road and defer consideration of Abbas’s bid for UN membership,” Miller said. “It can’t become a basis for sustainable negotiations, because it doesn’t address the problems impeding those negotiations.”

To contact the reporters on this story: Indira A.R. Lakshmanan in New York at ilakshmanan@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net