No peace in our time

Israel is facing crises on several fronts: fallout from the Lebanon war, the looming threat from Ira

The two young women peered attentively into their monitors. Their alarm increased as they zoomed in on two objects. Two small figures emerged on the black background as white shapes moving towards a target. The women shouted to their superior, Liron, a 20-year-old sergeant. She rushed over; they got on the phone and despatched a rapid reaction team. A few minutes later the soldiers reported back that these were in fact middle-aged women who had gone for a walk and had strayed a little close. Crisis averted.

I was standing in the control room of the Israeli army's base at Zufim, a short drive inside the West Bank, overlooking the Palestinian town of Qalqilya. The base is one of several set up specifically to stop incursions by Palestinians into Israel. Inside the makeshift "war room", a team of female conscripts stares at seven screens for four hours at a time. They are collectively responsible for 70km of the barrier. Most of the barrier has now been built: two sets of electronic fencing, separated by a tarmac road along which Israeli Humvees patrol. In the most populous and sensitive areas - those around Jerusalem and closest to the highway that links Jerusalem with Tel Aviv - the border is demarcated by a wall eight metres high.

The Israelis have all but established a permanent border shielding them from the Palestinians. In the process a further 10 per cent of Palestinian land has been appropriated. The official line is that the barrier is temporary, but very few people on either side believe this. Almost every Israeli I spoke to said it was one of the best decisions their government had taken in a long while. For the past two and a half years, since Israel started to erect it, the barrier has all but stopped the suicide bombings that were traumatising the people. As David, an army official, told me: "This is the lock on Israel's front door."

My first visit to Israel since early 2003 had not started propitiously. I was detained at Ben-Gurion Airport for 40 minutes. Another set of teenagers in uniform took my passport away into a back office. I was ushered - all very politely, if languidly - into a sectioned-off area in the company of anyone Arab or Palestinian, or anyone who looked remotely like a peace worker. Was it, I wondered, because of the various Middle Eastern stamps in my passport? Was it because the last time I was here I made a film about suicide bombers? (On that trip, I made a parallel film on life inside the Israeli army.) Was it because of the New Statesman? Or was it none of these things? I did not bother to find out.

I had come by invitation of Bicom, an Anglo-Israeli lobby group based in London. Unlike on my previous visit, I did not go across into Palestinian territory, though I did meet a senior adviser to Mahmoud Abbas, the Palestinian president, in East Jerusalem. The purpose of this trip was to hear the views of key Israelis - government ministers, foreign ministry and security officials, as well as leading figures in business - about the crises facing their country. And crises there are aplenty - the looming threat from Iran's putative nuclear arsenal; the constant threat of Syria, through what the Israelis see as its proxies in Hezbollah and Hamas; the consequences of the summer's war in Lebanon, described variously as a disaster or moderately bad; and the growing corruption inside Israel's body politic. The mood has rarely been more gloomy.

Staging post

I had first met Major General Giora Eiland in 2002, when the second intifada was at its height. He recently quit as head of Israel's National Security Council, and the experience has led him to stark conclusions. George Bush's "demo cra tisation" agenda for the Middle East has been a waste of time, he said. A two-state solution between Israelis and Palestinians is an illusion. The road map - the most recent attempt at a peace process - was never serious. As for Tony Blair and his pledge to use his remaining months to work for a settlement, "That cannot be based on any experience of the region." In short, "There is no solution that either side is interested in reaching."

As head of the NSC, Eiland was responsible for organising the army's withdrawal from Gaza and the removal of the 8,000 Jewish settlers there (a tiny number compared to the 125,000 on the West Bank). Eiland did his job, but now says he was against the plan all along. Israel, he says, extracted nothing in return. The same applies to the exit from Lebanon several years ago. Eiland has drawn up an elaborate alternative plan involving carving out a small section of Egyptian territory, handing that to Palestinians to build an economic zone, and building a tunnel connecting Egypt with Jordan through the southern tip of Israel. He says he has circulated it among the political and security elite, and has had a good reception. Others I spoke to as they scoured around for any signs of optimism (among them the deputy prime minister, Shimon Peres) have come up with their own economic and security plans for the Palestinians, but these all seem to be in the realm of make-believe.

I was sitting with Eiland at a restaurant in Herzliya, a seaside town that is home to many of Israel's wealthiest - including Blair's controversial fundraiser and Middle East adviser Lord Levy. With Tel Aviv to the south, and Netanya to the north, this area epitomises a calmer, more secular and modern part of Israel that the television cameras rarely show, away from the inter- religious travails in Jerusalem. And yet people here say they have less reason to feel safe than anywhere, pointing out that the West Bank is barely ten miles away. They are convinced that it is only a matter of time before a rocket attack, such as those that hit Haifa from southern Lebanon in the summer, is launched from Palestinian territory. In other words, walls and fences provide only limited protection.

On all fronts there is deadlock, admits Isaac Herzog, minister of tourism in the coalition government and a man earmarked for promotion. "Nobody can find the ignition key," he says. The West Bank and Gaza are paralysed by the power struggle between Abbas's Fatah and the elected Palestinian Hamas government, with intercommunal fighting increasing. Israel refuses to hand over more than $500m it has withheld from Palestine in tax revenues. With schools and hospitals closed in much of the West Bank, and with poverty reaching new heights, it is Hamas that appears to be more in control than the president whom the Israelis and Americans say they could - theoretically - do business with.

And yet while officials insist that "a hungry Palestinian is a dangerous Palestinian", the government is in no hurry to address the impasse. They are holding out for movement on two fronts from the Palestinians: the release of the Israeli soldier Corporal Gilad Shalit, believed held by Hamas, and Hamas's recognition of Israel. The second is the more intractable. Hamas says it has acceded to two of the three main pol itical demands by the Israelis - recognition of agreements previously signed, and a cessation of violence. Indeed, the Palestinians argue that, more than any fence, it is their hudna - their truce - that has stopped the suicide attacks, and that this has not led to any reciprocal move by the Israelis, such as the release of any of the estimated 10,000 Palestinians held in Israeli jails.

Wherever you go in Israel nowadays, it is hard to find an Israeli who has any meaningful contact with a Palestinian - the odd car mechanic, perhaps, or gardener, but that's about as far as it gets. This applies even to the dwindling number of Israelis who describe themselves as liberals. A wall has developed in minds, making them see the other side exclusively as a threat. Almost nobody has been into Gaza or the West Bank except as a soldier or to visit settlers; few venture even into East Jerusalem. When they do go to the Old City, they use a roundabout route that takes them past a few elderly Armenians to the Jewish Quarter and the Wailing Wall.

Some Israelis regards any form of economic help for Palestinians as subversive. After an interview (fairly conducted) with me about the NS's current subscriber campaign to plant olive trees in Palestine appeared in the Jerusalem Post, our office was bombarded with expletive emails about "Islamofascism" from Israel and the US.

The relationship with the US is more complex than is often portrayed. The countries have long been interdependent. The US provides Israel with all its military hardware, though Israeli army officials say that often they could buy better kit elsewhere, if allowed. Israel needs America to survive. The US needs Israel as its most reliable friend and staging post in a turbulent region. And yet Israeli officials are saying increasingly openly that the war in Iraq was a terrible miscalculation by Bush and Blair. "We told them five years ago that Iran was the problem and that they were focusing on the wrong target. But they wouldn't listen," said one official - not that anyone can recall such a warning being made in public at the time. That is the issue which alarms this country far more than any other: Iran.

Gaza as Somalia

Go too far in questioning the US link, and Israelis bridle. Often it is the right in the US, politicians and commentators, that pushes Israel not to give ground. At a press briefing given by Herzog, a reporter from the Atlanta Journal-Constitution harangued the Israeli government for even contemplating talking to the Palestinian leader.

Mark Regev, the Australian-born, pugnacious, but sometimes suave, chief spokesman at the ministry of foreign affairs (who appears to model himself on Alastair Campbell), was ready to engage on the mistakes made in the Lebanon war, on Iran, Syria and Palestine. He admitted that the peace process had come to a standstill but said no policy-maker was blind to the dangers ahead. "Gaza could go the way of Somalia," Regev said. "It's not in our interest to live next to a failed state." But when I asked whether Israel had been damaged by aligning itself with the neoconservatives' failed Middle East mission, he barked that this was a "simplistic, stupid question".

Parts of the east coast of the United States are culturally intertwined with Israel. Café conversation can be as much about Brooklyn or Florida as anything Israeli. I asked Erel Margalit, a high-tech venture capitalist and one of Israel's new breed of entrepreneurs, if that bond would ever loosen. "No, we regard both as home," he said. Marga lit personifies a younger generation that travels frequently, and is comfortable doing deals in Europe and Asia (particularly China, Israel's new friend). Although a supporter of the Israeli Labour Party, he is dismissive of the political class. As well he might be.

For years Israel has been saddled with a voting system that seems designed to produce instability. The current coalition, led by Ehud Olmert and the Kadima party founded by Ariel Sharon, struggles on from day to day. Its authority was severely dented by Lebanon. While some still argue over the actual outcome, there is universal alarm over failures to provide basic supplies, such as food, to some units, and the strategic mistakes the army made against a well-organised Hezbollah guerrilla force. All these problems were brought home in real time by soldiers sending text messages to their families and friends.

Now Olmert is looking to shore up his six-month-old administration by bringing in the staunchly anti-Arab right-winger, Avigdor Liberman, who represents Israel's increasingly powerful Russians. As I sat with foreign ambassadors in the Knesset, watching MPs scream at each other during the opening of the winter session, I was not sure whether to see this as a healthy sign of democracy or as an alarming demonstration of political stagnation. It is probably both, but not what is needed in a nation desperately seeking leadership and probity. That same day, the attorney general had announced a full inquiry into rape allegations against President Moshe Katsav. Shortly before, justice minister Haim Ramon resigned and went on trial for sexual harassment. And mere hours before the Israeli invasion of Lebanon on 12 July, the army chief of staff had cashed in his stock portfolio.

When the Knesset session ended I went to see Shimon Peres. In the adjoining room, a series of government ministers paraded in front of the cameras with the family of Ron Arad, an air-force navigator shot down near Sidon in Lebanon exactly 20 years ago and never seen since. It is said that every Israeli knows the name of at least one serviceman lost in action. Peres, at the age of 83, has seen peace processes come and go. He accepts that all the recent initiatives, including Olmert's plan for unilateral disengagement from the West Bank (albeit leaving many settlements intact), are as good as over.

Even he subscribes to the general view that Israel has "given away" too much: "We gave back land in Lebanon and Gaza and we became a shooting arena," he said. I suggested that public opinion had hardened so much now that there would be no respite for the Palestinians; that Lebanon had not reached the end of cross-border incursions; and that the prospect of a military strike on Iran was growing.

Peres did not demur. He accepted that, with Bush and Blair both lame ducks, and with Olmert and Abbas in serious trouble, there was nobody taking a lead. Nor did he deny that, if an election were held tomorrow, the Israeli right under Binyamin Netanyahu would win by a landslide. Still, he said, politicians have to do what is far-sighted, and not necessarily popular, in seeking a way out of the stalemate. "Public opinion is a matter of weather. I haven't met anyone who collects weather forecasts." That was as close as anyone came to providing hope.