Is US-Israel disagreement on a two-state solution unresolvable?

Last week, the penny finally dropped between the US and Israel. Israeli Prime Minister Benjamin Netanyahu owned up that he's been dissembling for decades, at least in English and in public, about being open to a two-state solution. He flatly ruled out any form of Palestinian statehood without offering an alternative addressing basic Palestinian human rights like citizenship. This has effectively been Israel's consistent policy, with a few notable hiccups, since the assassination in 1995 of former prime minister Yitzhak Rabin by an Israeli extremist.

Since at least 1990 implicitly, and explicitly once George W Bush formally endorsed in 2002, Palestinian statehood has been a US foreign policy goal. Even Donald Trump framed his 2020 proposal as a two-state solution, even as it envisaged Israel annexing 30 per cent of the occupied West Bank, including the Jordan Valley, which would have rendered Palestinian statehood effectively nominal. The plan’s titular architect, Jared Kushner, now says it was only meant as “a starting point” for negotiations intended to produce much smaller annexations.

As President, Joe Biden moved quickly to repair US policy by reaffirming Washington's commitment to a meaningful Palestinian state and opposition to annexation and settlement expansion. More recently, Mr Biden tried to use both the triangular negotiations with Saudi Arabia and Israel, and the post-October 7 crisis to put eventual Palestinian statehood back on the international and, especially, Israeli agenda.

Mr Netanyahu's declaration is both ideologically pure and cynically political. Israel is under significant pressure both in public and, especially, private, including from Washington and its potential normalisation partner Saudi Arabia, that any day-after scenario to the Israel-Gaza war would, rationally, have to involve forming an alternative, post-Hamas Palestinian government in Gaza (albeit, perhaps, with Hamas's acquiescence) and, more importantly, the restoration of the peace process but this time as a starting point with Israel explicitly acknowledging the Palestinian right to a state.

I'm always struck by how few people realise that Israel has not just never recognised a Palestinian state, but has never even acknowledged the Palestinian right to a state. To the contrary, all Palestinian-Israeli diplomacy to date has been based on a 1993 exchange of "letters of mutual recognition", which kicked off the Oslo process. That quickly led to the prevailing status quo in the occupied territories, but ground to a halt as soon as Rabin was murdered.

In a letter to Rabin on behalf of the Palestine Liberation Organisation, which is universally recognised as the legitimate representative of the Palestinian people diplomatically (even by Hamas), chairman Yasser Arafat recognised Israel and its right to peace and security. In reply, on behalf of Israel, prime minister Rabin recognised the PLO as a legitimate interlocutor and undertook to negotiate with it. That's all.

Many argue Israel implicitly recognised the Palestinian right to a state throughout its negotiations with the PLO, but that is simply not true. Israel never brought itself to acknowledge this Palestinian right, and, in that tradition, Mr Netanyahu has now categorically rejected it. The world knew that he and the Israeli right were merely pretending to be at all interested in peace while sabotaging a two-state solution diplomatically and strategically developing settlements to make it politically impossible.

His Likud party has Jewish control “from the river to the sea” – a geographical formulation routinely labelled as "genocidal" when Americans declare that "Palestine will be free" in the same area – as a key part of its founding document. At this year's UN General Assembly, during his address Mr Netanyahu brandished a map that included all the occupied territories in "Israel".

That's the ideological part.

Cynically, Mr Netanyahu knows that he's in big trouble because of the security meltdown on October 7, among other failings. So now he's been saying, bluntly: "The world is pushing us on Palestinian statehood, even in theory. Re-elect me and I will block this forever.” He's similarly been claiming "credit" for sabotaging the Oslo agreements, which is no idle boast.

The Palestinian issue was once a marginal matter in Israeli-American relations, but recent decades have shown how false that is time and again. So, now, at least with Mr Netanyahu in charge, and probably almost any other plausible Israeli prime minister as well, the US and Israel are at categorical odds on a two-state solution, and therefore peace.

Mr Netanyahu's position is simply not tenable for Washington, because – since he's certainly not willing to offer Palestinians citizenship in Israel – he's making it virtually impossible to rebut accusations that Israel maintains an apartheid-like political system in the occupied territories. Even in the medium term, Washington cannot be associated with that, particularly under the Democrats, including the over-35s like Mr Biden who, unlike younger liberals, are inclined to give Israel every benefit of the doubt.

Mr Biden tried to shrug this crisis off by saying: "We’ll be able to work out something." He tried claiming that Mr Netanyahu might be prepared to accept a non-militarised Palestinian state, but was immediately and flatly contradicted by Mr Netanyahu's spokespeople.

After decades of US and Israeli leaders dancing around the issue and performing extraordinary rhetorical and logical contortions to obscure the fact that their policies on this most central of issues are totally at odds, the jig is up. In a bid to be re-elected, Mr Netanyahu has put extremism on the table and on the ballot.

Even if he loses, unless his successor flatly contradicts these proclamations – which is extremely unlikely since this really is and has long been the Israeli position – then Washington must also stop pretending. The US is either going to have to give up on peace and the Palestinians altogether, which could prove fatal to sustaining its regional leadership, or break with Israel over this dramatically.

Within the next 24 months at the latest, Washington should make important aspects of bilateral relations with Israel contingent on, at a minimum, a formal Israeli declaration recognising the Palestinian right to a state in the normative Westphalian and UN meanings, which still leaves much to be negotiated. Almost 25 years after the disastrous 2000 Camp David summit – when some Arab leaders first began questioning Washington's post-Cold War leadership – a failure to confront Israel over peace could form part of a historic inflection point marking a potentially fatal crisis of US leadership in this vital region.

Washington must be clear that the "special relationship" is only sustainable with an Israel that's genuinely open to peace.

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