Has any short letter ever been so fateful? On 2 November 1917, Arthur James Balfour, the former Conservative prime minister who was now foreign secretary in David Lloyd George's wartime coalition government, wrote to Lord Rothschild conveying with "much pleasure" a declaration of sympathy, approved by the cabinet, to be passed to the Zionist Federation:

His Majesty's Government view with favour the establishment in Palestine of a national home for the Jewish people, and will use their best endeavours to facilitate the achievement of this object, it being clearly understood that nothing shall be done which may prejudice the civil and religious rights of existing non-Jewish communities in Palestine, or the rights and political status enjoyed by Jews in any other country.

Admirably as The Balfour Declaration relates how that letter came to be written, we scarcely need Jonathan Schneer to tell us that it changed history. Nearly a century later, the legacy of those 67 words is with us every day.

For 2,000 years, most of the Jews had lived in dispersion outside the Holy Land, praying for their return, though as a pious aspiration that the Almighty would bring about as and when He chose. But in the late 19th century a new movement advocated a Jewish state, as in the title of Theodor Herzl's book, published in 1896. Some enthusiasts took up this Zionist cause, though most Jews at the time did not. There was an existing, ancient Jewish community in Palestine, but it was tiny in numbers, perhaps no more than 7,000 when Herzl was born, before it was augmented by a few score thousand Zionist pioneers. Even then, by 1914, the Jewish inhabitants of Palestine accounted for little more than 10 per cent of the population.

The First World War changed everything: without it, there would have been no Russian Revolution, no Third Reich, almost certainly no Jewish state. Palestine was part of the Ottoman empire, which would not have survived much longer anyway, but sealed its fate by entering the war on the losing side. Desperate to find some escape from the bloody stalemate on the Western Front, the British looked east, fighting Turkey in the disastrous Gallipoli expedition, then launching the botched invasion of Meso­potamia (yes, Iraq), and then mounting a campaign to drive the Turks out of Palestine.

At this point, as Schneer vividly explains, British imperial interests began to engage with Zionism, but also with incipient Arab nation­alism. What the dubious T E Lawrence called the "Arab Revolt" began in the belief that London favoured a national Arab state or states. Double-dealing was thus implicit from the start, as this little territory became, in the pain­fully apt title of another good recent book, by the former US state department negotiator Aaron David Miller, The Much Too Promised Land.

A plausible Arab leader had emerged in the form of Faisal Ibn Hussein, son of Hussein Ibn Ali, sharif of Mecca. Faisal was working with nationalists in Damascus by the spring of 1915 when they drew a map of a new kingdom, embracing all Arab lands; it would be recognised and protected by Britain in return for economic favours, as they hoped. But some Englishmen had quite other ideas, notably Sir Mark Sykes, Yorkshire landowner, Tory MP and amateur diplomatist. In November 1915, he and François Georges-Picot, a French official who had served in Beirut and was now at the embassy in London, drew up another secret map. Araby was carved into portions directly ruled by Britain or France, with client states adjacent, and the Holy Land under international control. By 1917, Sykes was also intriguing with the Zionists in London - but they, like the Arabs, knew nothing of the Sykes-Picot plan. Even now the duplicity is breathtaking. Never has Albion been more perfidious.

The Russian-born Zionist leader Chaim Weizmann had lived in England for some years and had already formed valuable alliances, with Winston Churchill, among others. He and his colleagues quietly and persistently worked to persuade London politicians of the value of their cause, not least for the British empire. And so, "the Arab and Jewish nationalist movements pushed relentlessly forward, oblivious to each other", Schneer writes, "like two ships headed for collision in the dark". All of this is grippingly told, with a firm grasp of original and secondary sources.

While everyone knows about the conflict between Arab and Jew, which is still all too much with us, there was another and much less well-remembered conflict, to which some of the most fascinating pages here are devoted. It is now almost forgotten that a century ago many proud and pious Jews were passionately opposed to Zionism, notably in the higher realms of Anglo-Jewry. As Weizmann and his colleagues worked tirelessly to obtain Balfour's statement, the conjoint committee of the Board of Deputies of British Jews and the Anglo-Jewish Association, in the persons of Claude Montefiore, David Lindo Alexander and Lucien Wolf, worked just as hard to forestall it, supported by Edwin Montagu, the only Jew in the cabinet.

They were outplayed by the London Zionists, as Schneer describes, but not before they had published a declaration of their own in the Times some months before Balfour's letter. "The establishment of a Jewish nationality in Palestine, founded on this theory of home­lessness, must have the effect throughout the world of stamping the Jews as strangers in their native lands," they wrote. And "the proposal to invest the Jewish settlers in Palestine with certain special rights in excess of those enjoyed by the rest of the population . . . would prove a veritable calamity for the whole Jewish people".

Today we can see that the declaration was deeply hypocritical, not in its opening words up to "this object", but in that nervous qualification. How could this enterprise possibly fail to "prejudice the rights" of the majority who then lived in Palestine? But just as interesting are the words that come next. The "rights and political status" of Jews in the west may not quite have been prejudiced by a Jewish state, but their position has been complicated and, in some painful ways, today more than ever. Might not Montefiore and Alexander have had a point?

The Balfour Declaration: the Origins of the Arab-Israeli Conflict
Jonathan Schneer
Bloomsbury, 464pp, £25

Geoffrey Wheatcroft's books include "The Strange Death of Tory England" (Penguin, £8.99) and "Yo, Blair!" (Politico's, £9.99)