Different Discourse, Same Policy (For Now)
In September, the Two-State Index increased by 1%, rising from 4.94 to 4.99. Read our analysis below to learn how developments and dynamics this month impacted the feasibility of the two-state solution.

 

September at a Glance

  • Saudi-Normalization and Squaring the Israeli-Palestinian Circle: As the discourse shifts on the importance of addressing the Palestinian dimension, policy progress remains tethered.

  • The Gaza Unrest Playbook: Border protests toe a delicate line, avoiding a major escalation, as Hamas prioritizes economic and mobility concessions from Israel and Qatar.

  • Israeli Coalition Fault-lines and West Bank Volatility: Conflicting security calculations and ideological motivations impact the government calculus on PA stability.

  • US-Israel Bilateral Thaw: Biden seeks to avoid a crisis in relations as strategic push toward Saudi deal takes a front seat.

 

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Saudi-Normalization and Squaring the Israeli-Palestinian Circle

This month the pace of US-Israeli-Saudi-Palestinian diplomatic activity accelerated in relation to the burgeoning mega deal, with the contours of a Palestinian component coming into sharper focus. Talk in policy circles around what constitutes “meaningful steps on the ground” to preserve prospects for a future Israeli-Palestinian peace visibly ratcheted up. Notably, Palestinian statehood is not on the agenda. Given the trajectory of dynamics on the ground, the fact that the issue is receiving heightened attention underscores that a Palestinian dimension cannot be circumvented. It remains to be seen whether any deal will produce material transformation or rely on mere cosmetic gestures.

Much of the credit for the Palestinian issue's inclusion can be attributed to the US, which has repeatedly stressed the incorporation of meaningful deliverables that aim to reinforce the viability of the two-state solution. A somewhat consistent thread present in almost all diplomatic engagements held throughout September in Riyadh, Jerusalem, Amman and New York.

During the long-awaited Biden-Netanyahu that took place on the margins of the 75th Session of the UN General Assembly, a major element of their one-hour meeting focused on what has been coined the “Significant Palestinian Component” or the SPC, in which the two leaders reportedly agreed on the principle of preserving prospects for an Israeli-Palestinian peace deal in the future.

Still undefined, it is expected that a more ambitious package would seek to alter the territorial and political trajectory through measures such as redesignation of land from Area C and a settlement freeze. A more modest package would likely be limited to economic measures and declaratory statements at best. Keeping a “two-state solution alive” is subject to broad interpretation by the parties involved, in which built-in ambiguity may allow each party to sell it to their respective constituencies.


According to Celine Touboul, co-Director of the Economic Cooperation Foundation (ECF): “To be consequential, the proposed package should firstly, reduce tensions: important not only because bloodshed deepens the conflict, but because it compromises the legitimacy and sustainability of normalization. Second, it should create the conditions for a two-state reality by freezing progress towards annexation but changing course entirely by undoing current annexation schemes. Doing so could provide a credible political horizon that is also key to empowering the PA as a partner in stabilization efforts as well as future negotiations.”

Straddling the constraints of his ultra-right-wing coalition partners, wanting to appear flexible on the international stage, and steering clear of any commitments, Netanyahu’s messaging at UNGA centered around his much-touted “outside-in” approach to peacemaking that was invigorated by the Abraham Accords, without granting the Palestinians a veto. In the plenum, he also branded a map of Greater Israel, absent Palestinian territories, intending to illustrate a “new era of peace in the Middle East,” likely playing to his base.

Pathways to a deal remain marred by each party's domestic considerations, in particular in Israel, where the Religious Zionism (RZ) party with its 14 seats holds a veto over the existence of Netanyahu's 64-54 Knesset majority. Due to its staunch belief in exclusive Israeli sovereignty, RZ will oppose any meaningful moves on the Palestinian file and is likely to abandon the coalition party in such a scenario, leaving Netanyahu with a minority government of 50 seats. If Benny Gantz’s National Unity party, the most ideologically-aligned option, were to join the government, its 12 seats would give Netanyahu a 62 razor-thin majority. However, Gantz has thus far refused, knowing it would jeopardize his future electability, and has only gone as far as delivering a low-profile comment on “supporting from the outside.” 

Attitudes of the Israeli public seem to indicate more flexibility than the government: a Channel 12 Poll indicated more support (39%) than oppose (37%) a peace agreement with Saudi Arabia, even if it includes significant concessions to the Palestinians such as a settlement freeze, and allowing Saudi development of civilian nuclear power.

Meanwhile, the Saudi leadership proceeded to draw attention to the Palestinian issue, albeit in varying shades of intensity. In his inaugural English interview with Fox News, Crown Prince Mohammed bin Salman highlighted the goal of “easing the life of Palestinians,” a departure from his language at the Arab League Summit in May when he referred to the establishment of a Palestinian state on the ‘67 borders with East Jerusalem as its capital. Contrastingly, Foreign Minister Prince Faisal bin Farhan al Saud continued to emphasize that there can be no solution without an independent Palestinian state in his UN address and all media interviews. The Saudis' involvement in the "Peace Supporting Package" – an incentive-driven initiative to revive the peace process by the EU, Arab League, Egypt, and Jordan based on the API – underscores the latter position.


For its part, the PA’s decision to adopt a more proactive strategy is, at the very least, giving it a say in shaping the terms of the deal and also inoculating itself against future criticism for disengagement or rejectionism. Central to its strategic recalibration is reinforcing bilateral relations with Saudi Arabia, following a period of strained ties that saw funding to the PA dry up. The visit of the Saudi’s first non-resident ambassador to Palestine, Nayef bin Bandar Al-Sudairi sent a strong diplomatic signal to Ramallah. At the same time, the nixed decision to visit Al Aqsa — resulting from Palestinian's protesting an Israeli-police coordinated visit (the quitessential symbol of occupation to the Palestinians) rather than with the Waqf— displayed the delicate situation around status quo arrangements under normalization, Muslim pilgrimage to the Holy Esplanade and its potent symbolism in the Muslim and Arab world.

The coming weeks are critical as the Palestinian package is expected to be fleshed out, with the US Secretary of State Blinken’s scheduled October visit to the region marking the next significant juncture. “It is up to the Saudis, the Americans, and to a lesser extent the Palestinians to each make their own calculations on, if and how, to adjust their demands on Israel in the context of normalization,” says Dan Rothem, an independent analyst based in Tel Aviv. “If the parties choose to suffice for meaningless symbolic gestures coupled with financial aid, they will have forfeited a huge opportunity to advance the Israeli-Palestinian file, but — more importantly — they will make the new normalized relations extremely exposed and vulnerable to likely escalations in the Al Aqsa Mosque, in East Jerusalem, in Gaza, and ultimately in the West Bank as well.”

The TSI’s “US” parameter increased from 6 to 7 this month, signaling a higher level of active diplomatic engagement. Meanwhile, the “Israeli Public Discourse” and “Palestinian Public Discourse” parameters increased from 6 to 7, and 5 to 6, respectively in light of the issue being more present on the political and public agenda.

 

 

The Gaza Unrest Playbook

After a period of relative quiet on the Gaza security front since the last escalation between Israel and Palestinian Islamic Jihad (PIJ) in May, small-scale popular protests along the Gaza border resumed. For the past two weeks, Gazans gathered near-daily at the northern perimeter fence, setting tires alight, deploying incendiary explosive devices (IEDs), and launching incendiary balloons. In response, the IDF employed crowd control measures and sniper fire and struck several Hamas positions. According to the Palestinian Health Ministry, 88 were wounded, one killed by live fire, and six died due to a malfunctioning explosive device.

The protests primarily stem from the deteriorating socioeconomic conditions, while the declared objectives cite Israeli actions at the Al Aqsa compound (amplified by the timing of Sukkot) and in solidarity with Palestinian prisoners. Amid Gaza's already hard-squeezed humanitarian situation, a funding delay and shortage from key benefactors — Qatar, the PA, UNRWA, and WFP — has intensified pressures, compelling Hamas to slash civil servant wages to around 55%. The most significant cutback came from Qatar, which reduced its monthly support to Hamas from $30 million to $13 million, of which $10 million is earmarked for impoverished families. Further exacerbating this is the rising fuel and transportation prices, which impact $10 million worth of Qatari-funded Egyptian fuel that Hamas resells for wages. 


Some analysts claim that Israeli pressure has influenced Qatar’s funding reductions, aiming to deter Hamas from inciting West Bank attacks. Others point to a Hamas-Qatar schism, stemming from Hamas' renewed ties with Syria's al-Assad. Hamas has given tacit endorsement to the protests without direct association. By walking the tightrope of plausible deniability and allowing unrest, it aims to extract movement and financial concessions from Israel and Qatar respectively as it seeks to balance its resistance raison d’etre and responsibilities as a governing power. Both its restraint from launching rockets and the limited protest attendance – as opposed to the thousands who mobilized for the "Great March of Return" – suggest an intent to provoke rather than trigger a full-blown escalation. Israel has little interest in a wider escalation, consumed by its domestic political crisis, tensions in the West Bank, the northern border and likely seeing any escalation as a potential disruption to the Saudi-normalization process.

“Hamas is more invested heavily in West Bank escalation, recognizing a dual political opportunity: thwarting the Israeli government's annexation plans and undermining the Palestinian Authority. Hamas will seize every opportunity to amplify West Bank tensions,” says Palestinian analyst, Mohammed Daraghmeh.

The choreography between parties played out as expected, and following intensive mediation efforts from Egypt, Qatar and the UN, COGAT confirmed the Erez crossing reopening after a 12-day closure, allowing some 18,500 laborers to enter Israel. Israel – also accounting for a possible eruption in Jerusalem and the West Bank volatility – promised Hamas several concessions, including raising the number of permits to 20,000, expanding Gaza’s fishing zone, and easing export and import restrictions. Despite Israel’s tactical approach toward de-escalation, economic improvements will only deliver reprieve at the expense of addressing the core issues. 

The TSI’s “Humanitarian and economic conditions in Gaza” parameter dropped from 5 to 4 this month. Meanwhile, “Prospects for war in Gaza” decreased from 3 to 2.

 

 

Coalition Fault-lines and West Bank Volatility

This month rifts intensified within the Israeli coalition, as West Bank dynamics exposed inherent fissures between security calculations and ideological motivations. The conveyance of 10 armored vehicles from Israel to the Palestinian Security Forces (PSF) – aimed at enhancing its counter-militant capabilities – ignited considerable uproar among Religious Zionist MKs. Finance Minister Smotrich described it as “resuscitating the Oslo Accords,” revealing the stark chasm between proponents of PA stabilization for Israel’s security benefit and those advocating for its dissolution. A similar dynamic surfaced when National Security Minister Ben-Gvir sought to impose stricter conditions on Palestinian prisoners, curtailing visitation rights, despite Shin Bet's escalation warnings. While the decision is currently postponed, Ben-Gvir has since suspended his coalition support, a step of no formal consequence until the end of the Knesset recess, and he continues to be excluded from high-level security cabinet meetings. 

To the backdrop of sustained pressure from the US toward de-escalation, and in the context of the commitments made at the Aqaba and Sharm el-Sheikh summits, reports emerged that Israel halved the handling fee Jerusalem charges Ramallah for fuel transfers from 3% to 1.5%. Given the sheer scope of the PA's financial insolvency challenges, in real terms, such a cut will be insufficient in strengthening the body.

Meanwhile, the authority continued to face credibility crisis as the PA's effort to clamp down on gunmen and clear out growing weapons cache, continued to be hamstrung by IDF incursions which occurred in the refugee camps of Jericho, Bethlehem, Hebron, Tulkurum and the first raid in the Jenin refugee camp since the extended July operation, resulting in 3 Palestinian deaths and 30 injuries. Settler violence persisted amid insufficient law enforcement oversight. Concurrently, a series of attempted Palestinian attacks on Israeli targets in East Jerusalem, and on Route 60 in the West Bank led to several wounded. 

This month saw comparatively fewer settlement announcements, potentially influenced by an uptick in US-Israeli diplomatic engagement fed by the Saudi track. Notably, two significant plans in East Jerusalem were advanced: Kidmat Tziyon (385 units), established on the border between Ras al-Amud and Abu Dis (see map below); and Givat Hamatos D (3,500 units and 1,300 hotel rooms), which is part of the strategic effort to create a buffer between East Jerusalem and Bethlehem. In the West Bank, Israel delineated the legal perimeters of three outposts greenlit for legalization in February (Avigail, Asael, and Beit Hogla). In a rare move, a few days prior, it dismantled unauthorized infrastructures near Mitzpe Yitzhar – marking the third instance of this government removing illicit settler constructions.


All West Bank-relevant parameters remain unchanged this month.

 

 

US-Israel Bilateral Thaw

Amid a breakdown in US-Israel relations since the inauguration of Israel’s hardline right-wing government, the long-anticipated Biden-Netanyahu meet-up at the UNGA this month, and the announcement of Israel’s admission into the US Visa Waiver Program (VWP), are two consequential diplomatic gifts that will likely bolster Netanyahu’s domestic standing. 

While the US has historically prided its ties with Israel on “shared values,” recent Israeli policies, primarily in the judicial arena and in the West Bank, have tested this bond in unprecedented ways. Central to Biden's foreign, and by extension domestic, strategy before the upcoming elections is achieving the landmark US-Saudi deal, granting him a major diplomatic achievement.

According to former US Ambassador to Israel, Dan Kurtzer: “From the outset of the new Israeli coalition, Biden has made it clear that he will not allow a crisis in bilateral relations, and has been cautious with criticism, even regarding  the judicial overhaul to keep things on an even keel. Over the last month, the Saudi-Israel dynamic has prompted Biden to smooth over any rough edges. His main agenda is the much larger strategic picture of Saudi normalization, intertwined with domestic politics and keeping Republicans on board. The longer there was no meeting with Netanyahu, the longer it became a political question mark,”   He added, “while Biden wants the annexationist drive to slow, he has been prepared to swallow a lot over the last ten months in the interest of not sparking a crisis.”

Israel's entry into the US Visa Waiver Program, while a boon to bilateral ties, should not be misconstrued purely as a diplomatic concession. In essence, it is the fruit of a longstanding effort, expedited under the Bennet-Lapid leadership and driven by former US Ambassador Tom Nides.


The TSI’s “US” parameter increased from 6 to 7, as mentioned above, in relation to the US’ engagement on the Saudi-normalization track.

 

 

The Two-State Index (TSI) is part of the Two-State Coalition (TSC) that is brought to you by the Geneva Initiative, a Palestinian-Israeli organization working to promote a negotiated peace agreement in the spirit of the two-state vision. The TSI is part of the Two-State Coalition project, produced by an Israeli-Palestinian team, and reflects a unique bilateral perspective.

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