The future - As attitudes harden, the region faces terrible possibilities, including population transfer

Despite the obstacles, the blocked road to a two-states solution remains the best, and probably the only, way out of the spreading Israeli-Palestinian conflict. If the pursuit were to be abandoned, the remaining options are grim.

Optimists argue that Ariel Sharon's unilateral decision to dismantle the settlements in Gaza, as well as four outlying ones in the West Bank - the Israeli cabinet is to vote again before the decision is implemented - signals the first stage of a two-states solution coming into effect. The process has to be incremental and Gaza, they say, would be the start. Sharon, who has always been patron and protector of the settlers' movement, could also be the man who has the strength to call on them to make sacrifices for the greater good. In the same way that General de Gaulle told the French settlers in Algeria that their time was up, so Sharon could turn on the Israeli settlers, or at least on a few of them.

The leaderless Palestinians will, it is further argued, eventually accept what land and sovereignty the Israelis allow them. They will understand that only thus can they escape from 37 years of occupation. The futility of the current intifada is plain: it has worsened the Palestinians' condition; and the suicide bombing has lost them outside support and, some would say, the moral high ground. Their leaders are in prison, real or virtual. They have little respect for the corrupt, impotent administration that is still supposed to run their civic affairs. In their hopeless and bedraggled state, the Palestinians will make the most of "independence".

The rest of the Arab world will breathe a sigh of relief, sensing a respectable way of finally closing the door on the injustice suffered by a small group of importunate people. A fudge over control of the Muslim holy places in Jerusalem will serve to neutralise Islamic passion. Once Palestine is no longer a burning issue for public opinion, queering their pitch with the United States, the Arab states can turn to questions of much more immediate moment to themselves.

But there is little evidence that this vision is based in reality. The Israelis may well dismantle the clusters of small Gazan settlements, and bring their army home from a place that has no religious history and has always been troublesome to rule. But there is no sign that Israel intends to dismantle the big settlements in the West Bank, and it is these that are the real trouble.

On the contrary, there is already a move to enlarge some of the West Bank settlements in "compensation" for the propo-sed Gazan withdrawal. It is unrealistic to believe that any of the Palestinian land destined to be on the Israeli side of the new security barrier will ever be handed back. The result would be an independent West Bank cut into three or four separate cantons by the expanding settlements and the roads that integrate them with Israel - an independence that some say would resemble the Bantustans of South Africa during apartheid.

The Palestinians are in a bad way, without jobs, money or freedom. Those with the education and the contacts to move out of the region are increasingly doing so; those with neither are staying. Yet the notion that they would be willing to settle for whatever the Israelis decide to give them is unconvincing. Almost certainly, they would not. Their national identity is strong; they believe passionately in their own rights. The probability is that they will continue to struggle for self-determination.

And, if they do so, they can probably count on being supported by other Arabs, however reluctantly. Arab governments may yearn to be rid of a problem to which many of them give lip-service only, but they cannot ignore the strength of popular "street" support for the Palestinians. Their cause fires demonstrations against unpopular rulers, and those rulers have to be careful. Governments elsewhere need to be careful, too.

Islamist terrorist organisations, such as al-Qaeda, find in the Palestinian cause a more solid base for action than their own vaguer anti-Americanism. They use the Palestinians for their own ends, twisting their cause into one of their own. US reluctance to lean on Israel fuels Arab anger and is used by the terrorists. The injustice done to the Palestinians is thrown into the anti-American mix, providing an extra, and potent, reason for atrocities.

There has, however, been a change of mood among the Palestinians. Many are beginning to despair of the two-states solution, arguing that if their nationalism cannot be realised through an independent state in the West Bank and Gaza, then it will have to be sought elsewhere, on the land that most of them still call Palestine. They talk of Israelis and Palestinians living together in a binational state that would include the whole of the old Mandate.

All right, they say, we would have to be under Israeli rule. But we are that already. And look at the demographics. Currently, there are more than five million Jews in Israel, compared with well over three million Palestinians in the occupied territories and more than a million in Israel itself. The Palestinian birth rate is higher than Israel's and Jewish immigration there has drastically slowed (after the inrush of Soviet Jews in the 1990s, immigration in 2002 was the lowest for 13 years). So what happens, at some unknown point in the future, when the number of Palestinians living in the old Mandate (regardless of all those who were thrown out in 1948 and would not be allowed back) overtakes the number of Jews?

This was the prophesy of Faisal Husseini, the Palestinians' leader in Jerusalem who died in 2001. "I worry about today. But the Israelis should worry about the future." And the Israelis do indeed worry. According to David Landau, the editor of Israel's Haaretz newspaper, Palestinians may outnumber Israeli Jews in the combined territory of Israel, the West Bank and Gaza within the next ten years. "Israel is in imminent danger of defeat by the demographic trend confronting us," he told an American-Jewish symposium recently. "Those of you who believe, as I do, that our future resides in a just compromise and peace, please speak up."

Landau is a valiant liberal. Other Israelis see a different solution to the coming danger. They recognise that an apartheid system of government would be a political dead end. So the idea of the mass transfer of population, for long a forbidden subject, is now creeping into open discussion in Israel. A University of Haifa poll released last month showed that 64 per cent of Israelis believe their government should encourage Israeli Arabs to emigrate from Israel. Transfer is even advocated by people close to Sharon, though not by the prime minister himself.

The possibility of a return to the ethnic cleansing of 1948, when the Palestinians fled ahead of the Israeli army, is deeply alarming. Nor is it impossible, though this time it would happen much more slowly and less dramatically. It means that any Palestinian dream of a binational state is probably just a dream. Israel, for good reasons, will not abandon its identity as a Jewish state, and will not allow changes which threaten that Jewish state to creep up on it.

Thus, the two-states solution remains the only viable way out of the mess, for Israel as much as for the Palestinians. But if the pursuit of this solution meanders on as it has for the past ten years, it may soon be permanently blocked. Palestinian territory in the West Bank is being swallowed up by settlements, buffer zones and roads, and by the protective security barrier. The Palestinians themselves are becoming ever more desperate, more Islamist and more violent.

Some argue that, at this stage, outside intervention is essential. But such intervention would be meaningless unless it were led by the United States, and America's reluctance to press Israel to do anything it does not want to do increases with time. In the end, the Israelis and Palestinians will have to bring about change by choosing new leaders. Most people on both sides want a negotiated peace. But the Israelis need to elect leaders who are genuinely prepared to end nearly four decades of military occupation; who are prepared, while protecting their own people's security, to allow the Palestinians a viable sovereign state. The Palestinians need to move forward from their old "resistance" chiefs and find leaders who can enforce order, win respect and seize new chances swiftly and constructively. Nobody can say when any of this will happen. While waiting for it to happen, this tiny corner of the world grows ever more dangerous.

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