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Taken together, these factors suggest that a final status agreement is not now a real-world goal.
What is? A return to the realistic assessments and policies that marked Bush's first term. In practice, this suggests an intense concentration on building Palestinian institutions in the West Bank.
There is much to build on, with security force improvements well under way, the economy in decent shape, and a reliable and trustworthy leader in Prime Minister Fayyad. Neither the United States nor Israel has done nearly as much as it can to promote progress on the ground, allowing Palestinians in the West Bank freer movement and helping create more jobs and a better standard of living. After the Gaza war, Israel appears prepared to do more, and should be asked to do so; Israel has a strategic interest in the success of the Palestinian Authority in the West Bank and of moderate forces in Palestinian society more generally. Arab states should be pressured intensely to provide the funds needed to meet the PA payroll and undertake sensible investment projects, for example in housing and agriculture. The United States and the Quartet should take some time away from endless meetings and speeches and resolutions calling for immediate negotiations over final status issues, and turn instead to making real life in the West Bank better and more secure. If there is ever to be a Palestinian state, it will be the product of such activities, not of formulaic pronouncements about the need for Palestinian statehood now.
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But one is free to wonder as well whether Palestinian "statehood" is the best and most sensible goal for Palestinians. When I served under Secretary of State George Shultz in the Reagan administration, we were expressly opposed to that outcome and favored some links to Egypt and Jordan. On security and economic grounds, such links are no less reasonable now; indeed, given Hamas control of Gaza and the Iranian threat to moderate Arab states as well as to Israel, they may be even more compelling. As we've seen, President Bush in 2002 stated that the Palestinians should "reach agreement with Israel and Egypt and Jordan on security and other arrangements for independence."
Now, even the mention of Egyptian and Jordanian involvement will evoke loud protests, not least in Amman and Ramallah, and perhaps U.S. policymakers should think but not speak about such an outcome. There are many and varied possible relationships between a Palestinian entity in the West Bank and the Hashemite monarchy, and if none can be embraced today, none should be discarded either. One Arab statesman told me when I asked him about a Jordanian role that there "must absolutely be an independent Palestinian state in the West Bank--if only for 15 minutes," and then they could decide on some form of federation or at least a Jordanian security role for the area. If the greatest Israeli, Jordanian, and Egyptian fears are of terrorism, disorder, and Iranian inroads in a Palestinian West Bank state, a Jordanian role is a practical means of addressing those fears.
http://www.weeklystandard.com/Content/Public/Articles/000/000/016/177aimud.asp?pg=2