The Two-State Solution Is Dead! Long Live the Two-State Solution!

The negotiated two-state solution has been dead for a couple of years now, and even John Kerry’s version of giving it the Old College Try has failed. Don’t tell Mr Kerry, but this could be the greatest imaginable boon to the ever-elusive two state solution.

John Kerry looking disappointed
John Kerry: On a swift boat to nowhere? (photo credit: AP/Jason Reed/File)

The American Secretary of State is stinging from the Palestinian rejection of his efforts to achieve the holy grail of a negotiated solution to the Israeli-Palestinian conflict. As he left the region to find greener negotiating pastures in Ukraine, he has flung a Parthian shot at the negotiators: without a negotiated solution the result will be apartheid.

That is to say, John Kerry envisions a scenario in which the only alternative to an American-brokered negotiated solution is a minority Jewish population in Israel/Palestine running a vast miserable Arab bantustan in the West Bank and Gaza Strip.

He was predicting the death of a two-state outcome on the grounds that his negotiating table was the only place where that outcome could be birthed.

It’s not pretty, but it’s not apartheid

I too can develop scenarios, and the Israel-bantustan apartheid outcome doesn’t have to figure in. In fact, the disintegration of the illusion that there is a Middle East Peace Process might be the quickest and best way to three states (Israel, Jordan and Falesteen) in the old Palestine Mandate.

(I call a Palestinian state ‘Falesteen’ on the assumption that we in the West would want to use an authentic transliteration along the lines of Myanmar, and because the whiff of colonialism lingers around the spelling ‘Palestine’.)

The promise of a negotiated two-state solution peaked in 2009 when  Benjamin Netanyahu endorsed the concept.  An Israeli Prime Minister and a Palestinian President were, for the first time since Oslo, negotiating in the same space. Since then it has become increasingly apparent that Netanyahu is the only player left who is in favour of a two-state end-state.

Negotiated two-state solutions were a big thing last century. Ireland, India and Palestine were each partitioned between two peoples. Korea and Vietnam were partitioned between spheres of influence. Leaving aside the question of what alternatives were on offer at the time, none of these negotiated solutions seems to have met expectations.

We still want negotiated solutions on principle, though. Solving problems by force is the sort of thing we want to relegate to a darker past. Unilateral action, even when peaceful, is a denial of the principle of negotiated solutions.

They say that when you owe the bank a dollar you owe the bank; and when you owe the bank a million dollars you own the bank. What happens, then, when you owe the Israeli state electric company half a billion dollars?

We were pretty clear on what we expected from a negotiated two-state solution. Not all visions of a two-state future were utopian; we could easily develop realistic scenarios. Here are a couple of them.

Two State Solution 1: Eire and Ulster

Falesteen and Israel become two clearly demarcated states. Land which ended up on the wrong side of the cease-fire lines in 1949 would be swapped to create functioning contiguous states.

Economic prosperity would defang extremism, and Startup Nation Israel would seed a similar economic tiger in Falesteen. Palestinian extremism would become an exotic distasteful phenomenon restricted to the fringes of Palestinian politics.

The cultural baggage of the past century would live on in an increasingly dilute form. The Palestinian claim to Israeli territory would become a matter of lip service, joked about by Palestinian holiday-makers enjoying the rides at Disneyland Israel. A hundred years hence the Israeli ambassador to Falesteen would stand beside the Palestinian President on Naqba Day with bowed head; and his Palestinian counterpart in Israel would do the same on Yom Ha-Shoah.

Two State Solution 2: Two Koreas

Falesteen and Israel become two clearly demarcated states, negotiated between Israel and the Palestinian Authority. The new state of Palestine, born out of a successful peace conference, is accepted by all including extremists. The government of Falesteen adopts and maintains as a matter of policy its claim to all of British Mandate Palestine after the partition of Transjordan in 1922.

Marwan Barghouti, a man whose readiness to confront Israel can be questioned by nobody; is released from prison and becomes Palestine’s strong man. In clandestine co-operation with Israeli security forces he conducts a Night of the Long Knives in which Hamas ceases to exist as a coherent force.

The two states exist side by side across a fortified barrier, trading Israeli electricity and water for dressed stone and farm produce from Falesteen. The diplomatic ties between the two continue to be mediated by the United States, which pays each state billions of dollars every year to play nicely with each other. After an initial euphoric return of exiles, Falesteen suffers a serious brain drain as its educated citizens take their energy to Europe, Australia and America.

These scenarios are both imaginary, but they were both plausible so long as a negotiated two-state solution was taken seriously by someone, somewhere.

Now there are two options available to the Israelis and two parallel unilateral options available to the Palestinians. Different combinations of Israeli and Palestinian choices can yield different scenarios.

Israeli Option 1: Status Quo

The Israeli government can continue the status quo. Israel remains in law the occupying power in the West Bank, Gaza Strip and Golan Heights, with the Golan and segments of the West Bank adjacent to Jerusalem annexed under Israeli law. Most of the world considers the annexations and settlements illegal use of occupied territory, but it doesn’t make a blind bit of difference.

Israel continues to provide electricity and water to Palestinians with a significant subsidy. Palestinian exploitation of offshore gas resources comes to nothing because investing in Gazan gas is too risky.

Israeli security policy continues with a wary co-operation between Israeli and Palestinian security forces; there are separate, heavily monitored road systems in the West Bank; and occasional ineffectual rocket attacks from the Gaza Strip. The IDF and Border Police continue to grip the West Bank and picket the Gaza Strip.

The West Bank and Gaza Strip function as two separately governed provinces of Palestine separated by a big chunk of Israeli heartland. Like the various Kurdistans they are one people governed by more than one state.

Israeli Option 2: Unilateral Action

The Israeli government can take unilateral action. One example: Israel annexes some part of the West Bank, offers citizenship to Palestinians, evacuates some settlements to consolidate others; with no recognition by other governments. Another example: Israel recognises Falesteen as a state, withdraws most forms of co-operation and treats it as more or less hostile.

Israel demands market rates and prompt payment in sheqalim for electricity and water.

Palestinian Option A: Status Quo

The Palestinian government continues to assert itself as the government of a sovereign Falesteen. It has more success than the Turkish Republic of Northern Cyprus but less success than Kosovo in gaining recognition.

Falesteen continues to function as a failed-state-in-waiting with a vastly swollen public sector, crippled economy and the most under-utilised work force in the region.

Palestinian Option B: Unilateral Action

Unilaterally declaring independence is something the PLO did in 1988, and which the PA did again in 2012. Signing treaties last month was another unilateral Declaration of Independence. The PA will do it again after the next elections, and probably a few more times after that.

Breaking its fiscal and monetary ties to Israel is about the only meaningful action the PA can take. Israel collects income tax in the West Bank and import duties on goods entering Palestinian Authority areas and transfers the revenue, less a service charge, to the PA. When the Israeli government needs a stick to beat the PA with the revenue is temporarily held back.

The main reason Israel can’t switch those revenues off for long is that a proportion of the money goes to pay for Israeli-generated electricity sold to Palestinian areas. Israeli electricity is bought in bulk from the Israel Electric Company and sold by the Jerusalem and District Electricity Company or sold at subsidised rates, or supplied gratis, by Palestinian local authorities.

Even with deductions from the transfers to the PA, the Palestinian debt to the Israel Electrical Corporation will soon hit half a billion dollars. They say that when you owe the bank a dollar you owe the bank; and when you owe the bank a million dollars you own the bank. What happens, then, when you owe the Israeli state electric company half a billion dollars?

Refusing to accept $1bn a year would be a significant hit for the PA’s budget, but it could be made up for better or for worse by issuing a Falesteen currency. Cutting the fiscal umbilical cord would, however, also mean switching off the lights and the water pumps.

So the one meaningful unilateral action available to the Palestinian Authority is to do something which will result either in the Israel Electric Company giving electricity to Palestinians for free while Israelis pay; or in an Israeli-actuated economic and humanitarian disaster throughout the West Bank and Gaza Strip.

These options offer four scenario spaces.


Here are some sample scenarios:

1A Status Quo on Both Sides: This assumes no discontinuous change, and is the future where Mr Kerry’s ‘apartheid’ scenario lives.

Inflation in the PA continues to slightly exceed economic growth. The Palestinian people continue to be overeducated hewers of wood and drawers of water. As the old PLO fighters die off the only people who have the credibility to lead in Palestine are Hamas fighters. This leads to religiously conservative governments with strong Jihadist colouring, but which are relatively impervious to Iranian influence.

The IDF develops into more of a gendarmerie and less of a warfighting force, which becomes obvious the next time it has to fight a shooting war with Syria.

Some part of Palestine is always sufficiently deserted to permit Islamist factions to spite the more mainstream players or act as proxies of the more mainstream players by shooting rockets into Israel. The more mainstream players ensure that these rockets rarely hit anything.

Palestinian culture thrives overseas, characterised by a sense of loss and grievance. Israel continues to be seen outside the US as an aggressor, but American fears of Russian influence in the region strengthen security and economic integration between the US and Israel.

Israel is increasingly perceived as part of an undemocratic belt of human rights violators in the Eastern Mediterranean. Anti-Semitism thrives in Europe and increasingly in Sub-Saharan Africa, Central Asia and South America.

It’s not pretty, but it’s not apartheid.

1B Israeli Status Quo, Palestinian Unilateral Action

The PA develops its infrastructure sufficiently to break its electricity grid and water infrastructure from Israel’s. Palestine issues its own currency, backed by a combination of dollars and Jordanian dinars. Israel absorbs the fiscal hit from the shekel zone shrinking.

Cheap desalination throughout much of the region changes the quality of life for everyone.

The Israel-Palestinian conflict is seen largely as a thing of the past. The Palestinian security sector develops as a set of constantly-warring agencies unified by their reliance on a single source for their financing. International aid to Palestine, after an initial injection enabling infrastructure development, tails off significantly. Palestinian politics become less about confronting Israel and more about governance. A population sensitised to human rights issues after years of Israeli occupation proves resistant to tyranny; but corruption remains a significant problem.

2A Palestinian Status Quo, Israeli Unilateral Action

Israel conducts a set of annexations and evacuations which solidify a de facto border between Israel and Palestine. Some population transfer of Israelis takes place with comparatively little friction. Some population transfer of Palestinians takes place with a surprisingly large number of Arabs choosing to become Israelis and a surprisingly large number of Arabs choosing to remain Palestinians.

The warring factions of the Palestinian security sector find their own overseas sponsors, with Europe and the Gulf states financing the agencies they consider most useful or least dangerous. They are unable to provide a credible threat to either Jordan or Israel.

The Israeli Border Police shrinks to a conventional border patrol. The IDF gratefully gives up its longstanding counterinsurgency capabilities and becomes a smaller warfighting force. Its main effort is offering a credible deterrent to Iran, Syria, Egypt and Palestine simultaneously.

The narrative of Israel taking land is reinforced, but fears that Israel might gravitate towards the Russian orbit militate against international isolation.

2B Unilateral Action on Both Sides

Israel conducts a set of annexations and evacuations which solidify a de facto border between Israel and Palestine. Palestine cuts off fiscal and monetary ties to Israel. Qatar underwrites the Palestinian Monetary Authority, helping it to become the Central Bank of Palestine. Israel supplies water and electricity to Palestine at cost in return for prompt payment in full guaranteed by the Central Bank of Palestine.

The creation of a functioning State of Palestine causes immense instability in Jordan where the Palestinian population withdraws its consent from its Hashemite rulers. In an unlikely belated Arab Spring moment Jordan ceases to be a rock of peace, order and good government in the region.

Israel throws off the yoke of American security domination, choosing to forego the billions of credits that had to be spent in the States. Instead Israel aligns itself closer to Russia. Russia, seeking a secure base in the Eastern Mediterranean for its Black Sea Fleet, and seeking to check American influence through the restored Egyptian military dictatorship, cheerfully accepts Israel as a security partner in the region.

Let me tell you what I don’t see. I don’t see a single multi-ethnic democratic Palestine in which Jews live happy Jewish lives alongside their more numerous Arab neighbours.  No plausible action by either side would give that result.

I don’t see an Israeli government doing what its enemies have expected for years: annexing all of the West Bank. I don’t see a single mighty Israel in which a subjugated Arab population forgets its dreams of sovereignty and thanks its lucky stars that they aren’t Syrian. I don’t see a mighty Greater Israel successfully transferring a significant Arab population to Jordan, Bahrain or Detroit.

The Middle East is a place where the unthinkable sometimes becomes thinkable.  Two generations have grown up with the idea that a negotiated trade of land for peace would end the Arab-Israeli wars, and only now are people outside the region forced to admit that another resolution to the conflict will emerge.

Kerry’s scenario, presented to the Trilateral Commission in what they thought was a secret session, was an expression of despair at his own failure.  The emerging reality may be far better than he could have negotiated.


About the Author
Dr Lynette Nusbacher is a strategist and devil's advocate. She is a core partner in Nusbacher Associates, a strategy think-tank. She has been a senior national security official in the United Kingdom and was Senior Lecturer in War Studies at Royal Military Academy Sandhurst.