Relations between Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority (PA) President Yasser Arafat have deteriorated to such a degree, Western diplomats and experts say, that even if the United States can pull off a further Israeli withdrawal and get talks going, chances are that they would soon collapse
Dennis Ross, the US envoy `piggy in the Middle' is reported to have told his boss, Secretary of State Madeleine Albright: "A resumption of good-faith negotiations becomes more difficult, though no less urgent, practically by the day."
The leadership of each side is playing a double game: Performing to a domestic audience, particularly hard-line nationalists; and to the outside world, especially the Americans, trying to blame the other side for the deadlock.
"It is going from bad to worse," said an American diplomat in the US mission at the United Nations, "the two sides are both making unilateral gestures that threaten the few lingering chances of resuming the talks."
He spoke to the The Middle East in July as the US team were trying to head off an Arab sponsored resolution in the Security Council that would condemn Israel for trying to expand its disputed capital, Jerusalem.
The Americans argued that such moves have no practical usefulness and only weaken the pro-peace camp in Israel as they strengthen the Israeli right-wing argument that the UN was anti-Israel, thus making a negotiated settlement more difficult.
This argument failed to avert another resolution a few days earlier. On 7 July the UN decided by 124 votes to 4 (the US vote among the minority of four) to upgrade the Palestinians' observer status so they have the right to take part in the General Assembly debates and co-sponsor resolutions.
A day later the Palestinians inflamed the very fears of the Israeli right -- which is used as an excuse by Mr Netanyahu to stall the implementation of the Oslo Agreement: Mr Arafat repeated his threat to declare Palestinian independence on or after 4 May next year.
Late last month the Israeli government took a preliminary step on its own toward expanding the boundaries of Jerusalem by roughly half, pushing the lines not only westward into pre-1967 Israel but eastward and northward to envelop Jewish settlers in the West Bank.
This was to appease the right wing nationalists in Mr Netanyahu's Likud-led coalition, and the settlers who have been accusing the prime minister of selling out following the publication of leaked reports that he was about to accept an American plan to withdraw from 13.1 per cent of the West Bank.
Expanding Jerusalem would leave Israel in an improved position to dissect the territory of a prospective Palestinian homeland. It would also strengthen a heavily Jewish demographic weight (now 70 per cent) in post-1967 Greater Jerusalem -- a salient consideration whether or not final-status negotiations on Jerusalem ever begin.