As President Barack Obama continues on his Mideast trip, hoping to restart negotiations between Israel and the Palestinians, now would be a good time to rethink his approach to brokering peace. Mr. Obama, along with many other world leaders and governments, has of late been focusing on pressuring Israel on settlements, but the biggest and most important issue of the conflict is going ignored.

That issue would be the Palestinian refugees. Since 1948, Palestinian refugees of Israel’s War of Independence and their decedents, numbering around 4.8 million, have been scattered among Syria, Lebanon, Jordan, the West Bank, and Gaza. The Palestinians, and the Arab world as a whole, demand that they be resettled in the towns in Israel that they came from. This is a horrible idea; flooding a country of 7 million with another 5 million people, many of whom have been living under terrible conditions in their host countries and blame the Israelis for their predicament, will result in eradicating the Jewish character of the state at the least, and will very likely plunge the country into a bitter and bloody sectarian war not unlike the one that tore apart Lebanon for 25 years. This is, of course, unacceptable to Israelis, and they will never concede to such an arrangement.

This should also be unacceptable to any country that cares about the continuation of Israel and the welfare of the region. However, the world ignores this issue entirely. They believed that first tackling the easier issues, such as settlements, would make it easier to progress and move on to the more difficult ones, but experience has proven this theory false. Additionally, in most countries it is much more popular domestically and easier diplomatically to pressure Israel for concessions on settlements than it is to press the Palestinians and the whole Arab world to compromise on the centerpiece of the one issue that they all passionately agree on.

But that is exactly what they must do if they stand any chance of salvaging a two-state solution. Pressing Israel on settlements is the easiest route, sure, but it’s not only futile, it’s counter-productive. Recent polls show that a strong majority of Israelis want to see the creation of a Palestinian state, but they also don’t believe that a two-state solution is possible.

Take a look at the recent election if you want a hard look at the facts. The right-wing Jewish Home party rose to sudden prominence on a platform of partial annexation of the West Bank, while the two-state solution was largely ignored by its proponents on the left who focused on more popular issues like the economy and social justice. Pushing on the settlement front will do nothing to change this mindset; Israelis will never be willing to tear down settlements and give up their best bargaining chip without any guarantees that doing so will lead to a final, comprehensive peace agreement.

On the other side, the Palestinians believe there is no need to make concessions to the Israelis, since they can have all their demands met unilaterally by convincing the world to put pressure on Israel. This has been their strategy lately with the successful bid to upgrade their status in the U.N. as well as their missions around the world. Pushing settlement freezes and withdrawals, while ignoring the refugee issue, as world leaders have been doing lately, only reinforces this notion, and keeps the Palestinians from bothering to negotiate. Continuing to allow Abbas to let his people believe that they can have their cake and eat it too (67% support negotiations, 85% reject compromising on any core issues, according to a 2010 AWRAD poll) will only make an eventual compromise impossible.

Mr. Obama needs to lead the world in pressing the refugee host nations to absorb their refugees and grant them full citizenship rights, as Jordan has largely done. And more importantly, he must demand from Palestinian Authority President Mahmoud Abbas to give up on any right of return and negotiate a compromise in which the refugees are compensated by Israel and settled either in their host countries, the future Palestine, or elsewhere. Convincing the Palestinian people to give up on their demand for right of return will be an incredibly difficult sell, but it must be done if they are to ever arrive at a final agreement. Once they come to terms with the fact that the refugees will not be returning to Israel, the Palestinians will have crossed the largest obstacle on their way to statehood. And on the other side they’ll find a rejuvenated Israeli peace camp and an Israeli public optimistic and willing to compromise. And they need Mr. Obama to help get them there.