JERUSALEM, Jun 28 (IPS) - Under a complex twin-pronged initiative from the U.S. and Egypt, Israel's hard- line government is moving towards backtracking on two major planks of its policy in the occupied territories - resisting demands for a blanket freeze on all settlement building in the West Bank, and acquiescing in the end of its tight siege of the Hamas-controlled Gaza Strip.
As a result, several pieces in an elaborate diplomatic puzzle that seeks to resolve both a long stand-off in Israeli-Palestinian relations and a three-year showdown in Palestinian-Palestinian relations since Hamas won the Palestinian elections, are beginning to fall into place.
Even a full-fledged truce between Israel and Hamas, something that has proven elusive since the end of the 22-day Gaza war last January, suddenly seems not beyond the realm of the possible.
It is the Administration of U.S. President Barack Obama that generated the initial momentum and continues to provide much of the impetus for what could be a dramatic shift in the constellation of forces in the Israeli- Palestinian equation. But it is Egypt which is proving to be the linchpin - especially in regard to fostering a dramatic change within Palestinian domestic politics that would allow Hamas and the Fatah-controlled Palestinian Authority to work towards ending their power struggle.
Another round of talks between Fatah and Hamas representatives was getting under way in Cairo on Sunday with Egyptian mediators trying to convince the two sides to accept a reconciliation agreement that could yield a new Palestinian governing authority in Gaza.
The Egyptians, under their national intelligence chief, General Omar Suleiman and his deputy, Muhammad Ibrahim, are turning up the heat. They have designated Jul. 7 as a deadline, warning that if Fatah (represented by former prime minister Ahmad Qureia) and Hamas (headed by politburo deputy chief, Mussa Abu Marzouk) continue to remain at loggerheads, Cairo would withdraw its mediation.
According to reliable Palestinian and Israeli sources, key elements in the Egyptian proposal include the following: Hamas would agree to relinquish some of its control over the Gaza Strip; that would pave the way towards a ceasefire agreement with Israel; then, the subsequent lifting of the siege of Gaza through the opening of the border crossings with both Israel and Egypt would allow the setting up of a committee under Palestinian Authority President Mahmoud Abbas charged with administering Gaza.
Collaterally, military and security experts from Egypt and other Arab countries would be stationed in Gaza to oversee the revamped joint Palestinian security forces made up jointly of Fatah and Hamas units which would, inter alia, be responsible for supervising the border crossings on the Palestinian side.
Finally, new Palestinian elections are mooted for January next year.
The end result, backed actively by the U.S. and the EU, is to see the start of a process that that will pave the way for renewed negotiations between the Palestinian Authority and Israel. Egypt, the U.S. and the EU all recognise that without an internal Palestinian deal, Palestinian-Israeli talks would be futile.
Up until now, Israeli Prime Minister Benjamin Netanyahu has declared himself ready to resume talks with the PA "today". But, bound as he is to the destruction of Hamas by coalition agreements with the ultra-nationalist flank of his government, Netanyahu has ruled out any contacts with the Palestinians were Hamas to be included in any shape or form with the PA. The PA, on the other hand, balks at any resumption of talks with Israel so long as Israel does not abide by the U.S. demand on settlements.
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Egypt's President Hosni Mubarak, for his part, is weighing in with a tantalising inducement to Israel - offering gradual normalising of relations between the pro-peace Arab states and Israel, even in advance of any sort of agreement towards peace with the Palestinians, but on the proviso that Israel makes a move on settlements first.
During his trip to Europe last week, Netanyahu discovered that even Israel's "best friends", France and Italy, insist on such a freeze. This was underlined again on Friday when the foreign ministers of the Quartet (the U.S., EU, Russia and the UN), meeting in Trieste in Italy, issued an identical demand.
Faced with such concerted pressure, Netanyahu is dispatching his Defence Minister - and currently closest political ally - Ehud Barak to Washington Monday with a counter-offer. Reportedly, Netanyahu may even go so far as to agree to a total three-month hiatus in settlement building to sway the Administration from its unyielding position.
It looks as if Netanyahu, despite his strong ideological commitment to the settlement enterprise, may be coming round to recognise that he can ill- afford to stand pat in face of this joint U.S.-Egyptian pincer strategy.
Whether, though, there is indeed a positive denouement in this effort to produce a more hopeful shape to Palestinian-Israeli, and Palestinian- Palestinian relations, may well be seen in a parallel development on a separate front: a prisoner exchange involving the abducted Israeli corporal Gilad Shalit for hundreds of Hamas and other Palestinian prisoners long held by Israel.
After three years of fruitless negotiations, a sudden flurry of reports suggests that a deal may not be far in the offing. Although denied by both Israel and Hamas, the reports persist. Pointedly, Barak said before departing for Washington that reports about an "imminent" Shalit deal are "harmful". He did not, however, rule out the reports.
Such a deal would be a salutary shot in the arm for the current elaborate efforts to move the region from simmering confrontation to an atmosphere conducive to possible progress on the diplomatic front, say Israeli officials.
The message is apparently not lost on either side.
For Israel, beyond the prisoner exchange and despite its abhorrence of Hamas, there is a decided interest in seeing this Egyptian-U.S. initiative for an internal Palestinian deal succeed. After all, say Israeli analysts, it would be hard for Israel to veto the establishment of a joint committee under Palestinian Authority President Mahmoud Abbas in Gaza - especially if the alternative is to leave Hamas exclusively in control of Gaza.
Similarly for Hamas, after the battering which it sustained during the Israeli assault, it would find it hard to turn its back on what could be an opportunity to rebuild Gaza, a process that has so far been stymied by the Israeli siege to the acute suffering that continues to afflict the Gaza population.