- Bernd Debusmann is a Reuters columnist. The opinions expressed are his own -

Time is running out for Israel and the Palestinians. Barack Obama is probably the last American president to have the option of pursuing an accord leading to the establishment of a Palestinian state alongside Israel, the so-called two-state solution.

If that fails, another generation will be locked into bloodshed and strife. That is the bleak scenario painted by two senior American Middle East experts in a new book, Restoring the Balance: A Middle East Strategy for the Next President. It is the product of an 18-month joint study by the Saban Center for Middle East Policy at the Brookings Institution and the Council on Foreign Relations, two pillars of the U.S. foreign policy establishment.

The authors of the chapter on the Arab-Israeli conflict, Steven A. Cook and Shibley Telhami, see American involvement in peace diplomacy as indispensable and say last month’s presidential elections opened new opportunities. But they note that after years of unsuccessful negotiations, there is a
growing sense of disbelief in the possibility of a peaceful agreement.

“More troubling, an increasing number of Palestinian and Arab intellectuals are abandoning the idea of a two-state solution and are now advocating a one-state solution in which Jews and Arabs coexist in a binational state. In Israel some mainstream voices are now arguing that the two-state solution is
unachievable…”

“Left on its current trajectory, the Arab-Israeli conflict is on the verge of moving into a potentially disastrous phase in which Israelis and Arabs broadly come to believe that the two-state solution is no longer viable,” the authors say.

Possible consequences of that belief include a third Palestinian intifada (uprising), a unilateral Palestinian declaration of independence and the collapse of the Palestinian authority.

Hamas, the Islamist movement which controls Gaza and is growing in influence on the occupied West Bank, run by the rival Fatah, would be strengthened.

To prevent the dire consequences they foresee, the authors say the new U.S. administration must give high priority to peace diplomacy and change policies on key aspects. Pressing Israel to freeze building settlements in the West Bank is high on their list. So is getting Hamas into the negotiating fold as part of a unity government. (So far, the U.S. and the European Union brand Hamas a terrorist group that cannot be a negotiating partner).

So can Obama do what is necessary to end the impasse? Is the only alternative to a two-state solution renewed, large-scale bloodshed?

NO SIGNS OF FRESH THINKING FROM OBAMA

While Obama has been critical of the hands-off approach to the Israeli-Palestinian conflict in the first seven years of the Bush administration, dismissing its efforts as “trips consisting of little more than photo-ops”, the president-elect has shown no sign that he might be willing to break with the decades-old policies that have earned the U.S. a reputation in the Arab world of backing Israel no matter what.

Would Obama, for example, use the threat of withholding U.S. financial aid to get Israel to stop building new settlements in the West Bank - where there already are 240,000 Israeli settlers - or dismantle existing ones? Not likely. Would he throw his weight behind calls for an end to Israel’s economic blockade of Gaza?

Would he, as the Brookings/Council on Foreign Relations report suggests, “recognize that Hamas’s power stems from genuine support among a significant segment of the Palestinian public..?” There’s nothing in his public statements that indicates he would and there are no pointers that he intends to depart from long-standing U.S. policies on the conflict.

That includes the two-state idea. What’s remarkable in the Brookings/CFR analysis is the concern it expresses that in the absence of a peace settlement, secular elites will turn their back on the notion of a Palestinian state in the West Bank and Gaza and instead opt for one country (Israel, the West Bank and Gaza) in which Arabs and Jews are equal. For decades, the one-state idea was the preserve of a handful of far-left Israelis and Palestinian activists. The fact that it is now bubbling up into the mainstream shows that is gaining currency.

One of the most vocal proponents of the idea is Ali Abunimah, a Palestinian-American activist and author of One Country: A Bold Proposal to End the Israeli-Palestinian Impasse. “All the talk of a two-state solution, all the diplomatic initiatives are divorced from the reality of what Israel is doing on the ground,” he says. “A Palestinian state requires the removal of settlements and that’s not likely to happen.”

Most Israelis reject the notion of one state for all, chiefly for reasons of demographics. Because of higher Palestinian birth rates, Israeli Jews will become a minority within the next two years if present trends continue. By December 2007, Israeli Jews made up just under 48% of the population in the area that would make up one state, Palestinians 46%.

Abunimah, a co-founder the The Electronic Intifada, a website critical of U.S. and Israeli policies, has something in common with the more moderate experts from Brookings and the Council on Foreign Relations. “Solving the Arab-Israeli conflict requires a sledgehammer,” he says, “Not a scalpel.”

Echoing that sense of urgency, the Brookings report says: “The time for incremental agreements has passed.”

You can contact the author at Debusmann@Reuters.com.

For previous columns by Bernd Debusmann, click here.

The price of oil may have dropped by more than half in recent weeks but the Saudi petrodollar appears to have lost none of its allure, judging by the procession of very important visitors to the New York Palace Hotel this week and to the U.N. General Assembly. With President George W. Bush in the lead, they have all come to present their compliments to King Abdullah, the Saudi ruler, who has turned the Manhattan hotel and the world body into an extension of his court, complete, it would seem, with a Majlis to receive petitioners.

Naturally, all the VIPs visiting him are eager to congratulate his majesty on his interfaith initiative, a gathering of religious and political leaders which took place  this week under the auspices of the United Nations. The meeting has attracted extravagant praise from, among others, Tony Blair, the former British Prime Minister,  and Shimon Peres,  the veteran Israeli president.

It is a fact that the king's initiative is unprecedented and bold, taking place despite the displeasure of many influential religious clerics at home. It is also a fact that he is the first Saudi leader to have travelled to the Vatican, opening dialogue between the two largest religions.

But some commentators have pointed out the oddity that the king, who at home shares power with clerics of the puritanical Wahhabi Islam -- which forbids any expression of other religious belief inside the kingdom, even of less austere forms of Muslim belief -- should be so keen on interfaith dialogue abroad. Even Mr Blair admits coyly, in a newspaper article to coincide with the conference, that the king is also "the leader of a nation that critics say has been slow to modernise, with fraught consequences for the rest of the world".

Critics also point out that the 15 Saudi hijackers who were among the 19 young Arab men who carried out the Sept 11, 2001 attacks against the Twin Towers and the Pentagon in the United States were partly influenced by the Wahhabi ideology.

But amid the financial turmoil sweeping international markets, the galaxy of world leaders chose to set aside their misgivings about Saudi Arabia's domestic policies and freedom record. In their sight, they had one goal:

They are hoping Saudis will stump up cash to help the International Monetary Fund bail out emerging and developed countries in crisis.

Diplomats at the United Nations uncomfortably (and privately) acknowledge that Saudi Arabia's wealth and its growing importance as a major contributor to the U.N. aid programmes -- it recently gave $500 million to the World Food Programme -- were behind the high turnout at the forum and lack of criticism of Saudi domestic policies.