American efforts to get Israel to freeze Jewish settlement construction have collapsed. U.S. officials are scrambling to get Middle East peace talks back on track. But Palestinians are talking about moving ahead on their own toward an independent state.
President Obama's goal of reaching a comprehensive Middle East agreement by next September seems more remote than ever. So, the Palestinians are threatening to dissolve their limited government in the West Bank and act unilaterally to get the United Nations to approve an independent state.
Such a state has already been recognized by Brazil and Argentina. Palestinians say letters of recognition could also be on the way from Uruguay, Chile, Paraguay and Peru.
Direct Israeli-Palestinian peace talks got under way three months ago with great fanfare here in Washington. At that time, Mr. Obama pledged that he would try to reach a final peace accord between Israelis and Palestinians within a year.
But when a 10-month Israeli settlement freeze ended just a few weeks later, the Palestinians dropped out and refused to come back until Israel agreed to renew the construction slow-down.
Last month, Secretary of State Hillary Clinton held a seven-hour meeting with Israeli Prime Minister Benjamin Netanyahu in New York. She promised Israel a major package of incentives, including sophisticated F-35 fighter jets, in return for a renewed 90-day settlement freeze. Some said the U.S. offered Israel far too much in exchange for a brief window of opportunity.
Palestinian President Mahmoud Abbas insisted any new freeze include East Jerusalem, as well as the West Bank. But Israel kept on approving new housing. Right-wing members of Netanyahu's government threatened to bring down his coalition if he agreed to Palestinian demands.
Now, the Obama administration has given up trying to convince Israel to stop building Jewish housing in the West Bank and East Jerusalem. American officials admit that path is not going to work.
Israelis and Palestinians are returning to Washington but direct face-to-face talks are no longer an option. Officials will be forced to go back to shuttling between the two sides next week in an effort to reach some sort of an agreement, what they call "proximity talks."
Now that the Obama administration has given up on this attempt at direct talks, Palestinians are very skeptical U.S. officials can make the peace talks work.
"The one who couldn't make Israel limit its settlement activities in order to conduct serious negotiations, how can he be able to make Israel accept a fair solution," Yasser Abed Rabbo, a top aide to Palestinian President Mahmoud Abbas told Voice of Palestine Radio. "This is the big question now."
"Instead of declaring Israel responsible for the talks' failure, the American administration is giving the Israelis an opportunity to waste more time by calling for the renewal of the talks," Abed Rabbo said on the Israeli YNet web site of the Yedioth Ahronoth newspaper.
Some experts say the best way forward is for President Obama to present his own peace plan which takes into account any progress made in past negotiations.
"Folks are a bit frustrated with the approach that the administration is taking, or the lack of a consistent and coherent approach," James Zogby, president of the Arab American Institute, told CBS Radio News. He says the Palestinians "have been on the sideline, watching the U.S. act on their behalf but actually not on their behalf."
There were plenty of excuses sprayed around the Middle East. A State Department spokesman said Israel has been too preoccupied with putting out a massive wildfire in the northern part of the country. Israel's Defense Minister said the Obama administration was too caught up in reacting to the Wikileaks disclosures.
Some blamed Netanyahu, saying he was just pretending to be interested in a peace accord with the Palestinians. "He doesn't enter negotiations just to negotiate," said his aide Ron Dermer in Israeli radio interviews, "But he has red lines."
Israel captured the West Bank and East Jerusalem in 1967. Many presidents have tried and failed to resolve the dispute. And now in the middle of difficult negotiations with Democrats and Republicans in Congress over financial issues, the Obama administration finds itself facing yet another Middle East crisis.