Abir Dandis, the mother of the two girls who were murdered in the Negev town of Al-Fura’a last week, couldn't find a police officer to listen to her warnings, neither in Arad nor in Ma’ale Adumim. Both police stations operate in areas where Israel wants to gather the Bedouin into permanent communities, against their will, in order to clear more land for Jewish communities. The dismissive treatment Dandis received shows how the Bedouin are considered simply to be lawbreakers by their very nature. But as a resident of the West Bank asking for help for her daughters, whose father was Israeli, Dandis faced the legal-bureaucratic maze created by the Oslo Accords.

The Palestinian police is not allowed to arrest Israeli civilians. It must hand suspects over to the Israel Police. The Palestinian police complain that in cases of Israelis suspected of committing crimes against Palestinian residents, the Israel Police tend not to investigate or prosecute them.

In addition, the town of Al-Azaria, where Dandis lives, is in Area B, under Palestinian civilian authority and Israeli security authority. According to the testimony of Palestinian residents, neither the IDF nor the Israel Police has any interest in internal Palestinian crime even though they have both the authority and the obligation to act in Area B.

The Palestinian police are limited in what it can do in Area B. Bringing in reinforcements or carrying weapons in emergency situations requires coordination with, and obtaining permission from, the IDF. If Dandis fears that the man who murdered her daughters is going to attack her as well, she has plenty of reason to fear that she will not receive appropriate, immediate police protection from either the Israelis or the Palestinians.

Dandis told Jack Khoury of Haaretz that the Ma’ale Adumim police referred her to the Palestinian Civil Affairs Coordination and Liaison Committee. Theoretically, this committee (which is subordinate to the Civil Affairs Ministry) is the logical place to go for such matters. Its parallel agency in Israel is the Civilian Liaison Committee (which is part of the Coordination and Liaison Administration - a part of the Civil Administration under the Coordinator of Government Activities in the Territories).

In their meetings, they are supposed to discuss matters such as settlers’ complaints about the high volume of the loudspeakers at mosques or Palestinians’ complaints about attacks by settlers. But the Palestinians see the Liaison Committee as a place to submit requests for permission to travel to Israel, and get the impression that its clerks do not have much power when faced with their Israeli counterparts. In any case, the coordination process is cumbersome and long.

The Palestinian police has a family welfare unit, and activists in Palestinian women’s organizations say that in recent years, its performance has improved. But, as stated, it has no authority over Israeli civilians and residents. Several non-governmental women’s groups also operate in the West Bank and in East Jerusalem, and women in similar situations approach them for help. The manager of one such organization told Haaretz that Dandis also fell victim to this confusing duplication of procedures and laws. Had Dandis approached her, she said, she would have referred her to Adalah, the Legal Center for Arab Minority Rights in Israel, which has expertise in navigating Israel’s laws and authorities.

John Kerry revealed his long-awaited plan for peace in the Middle East on Sunday, hinging on a $4bn (£2.6bn) investment in the Palestinian private sector.

The US secretary of state, speaking at the World Economic Forum on the Jordanian shores of the Dead Sea, told an audience including Israeli president Shimon Peres and Palestinian leader Mahmoud Abbas that an independent Palestinian economy is essential to achieving a sustainable peace.

Speaking under the conference banner "Breaking the Impasse", Kerry announced a plan that he promised would be "bigger, bolder and more ambitious" than anything since the Oslo accords, more than 20 years ago.

Tony Blair is to lead a group of private sector leaders in devising a plan to release the Palestinian economy from its dependence on international donors. The initial findings of Blair's taskforce, Kerry boasted, were "stunning", predicting a 50% increase in Palestinian GDP over three years, a cut of two-thirds in unemployment rates and almost double the Palestinian median wage. Currently, 40% of the Palestinian economy is supplied by donor aid.

Kerry assured Abbas that the economic plan was not a substitute for a political solution, which remains the US's "top priority".

Peres, who had taken the stage just minutes before, also issued a personal plea to his Palestinian counterpart to return to the negotiations.

"Let me say to my dear friend President Abbas," Peres said, "Should we really dance around the table? Lets sit together. You'll be surprised how much can be achieved in open, direct and organised meetings."

Thick locks hug the front gates of shuttered shops, now covered in graffiti and dust from lack of use. Only a handful of customers pass along the dimly lit road, sometimes stopping to check the ripeness of fruits and vegetables, or ordering meat in near-empty butcher shops.

“All the shops are closed. I’m the only one open. This used to be the best place,” said 64-year-old Mustafa Sunocret, selling vegetables out of a small storefront in the marketplace near his family’s home in the Muslim quarter of Jerusalem’s Old City.

Amidst the brightly coloured scarves, clothes and carpets, ceramic pottery and religious souvenirs filling the shops of Jerusalem’s historic Old City, Palestinian merchants are struggling to keep their businesses alive.

Faced with worsening health problems, Sunocret told IPS that he cannot work outside of the Old City, even as the cost of maintaining his shop, with high electricity, water and municipal tax bills to pay, weighs on him.

“I only have this shop,” he said. “There is no other work. I’m tired.”

Abed Ajloni, the owner of an antiques shop in the Old City, owes the Jerusalem municipality 250,000 Israeli shekels (68,300 U.S. dollars) in taxes. He told IPS that almost every day, the city’s tax collectors come into the Old City, accompanied by Israeli police and soldiers, to pressure people there to pay.

“It feels like they’re coming again to occupy the city, with the soldiers and police,” Ajloni, who has owned the same shop for 35 years, told IPS. “But where can I go? What can I do? All my life I was in this place.”

He added, “Does Jerusalem belong to us, or to someone else? Who’s responsible for Jerusalem? Who?”

Illegal annexation

Israel occupied East Jerusalem, including the Old City, in 1967. In July 1980, it passed a law stating that “Jerusalem, complete and united, is the capital of Israel”. But Israel’s annexation of East Jerusalem and subsequent application of Israeli laws over the entire city remain unrecognised by the international community.

Under international law, East Jerusalem is considered occupied territory – along with the West Bank, Gaza Strip and Syrian Golan Heights – and Palestinian residents of the city are protected under the Fourth Geneva Convention.

Jerusalem has historically been the economic, political and cultural centre of life for the entire Palestinian population. But after decades languishing under destructive Israeli policies meant to isolate the city from the rest of the Occupied Territories and a lack of municipal services and investment, East Jerusalem has slipped into a state of poverty and neglect.

“After some 45 years of occupation, Arab Jerusalemites suffer from political and cultural schizophrenia, simultaneously connected with and isolated from their two hinterlands: Ramallah and the West Bank to their east, West Jerusalem and Israel to the west,” the International Crisis Group recently wrote.

Israeli restrictions on planning and building, home demolitions, lack of investment in education and jobs, construction of an eight-foot-high separation barrier between and around Palestinian neighbourhoods and the creation of a permit system to enter Jerusalem have all contributed to the city’s isolation.

Formal Palestinian political groups have also been banned from the city, and between 2001-2009, Israel closed an estimated 26 organisations, including the former Palestinian Liberation Organisation headquarters in Jerusalem, the Orient House and the Jerusalem Chamber of Commerce.

Extreme poverty

Israel’s policies have also led to higher prices for basic goods and services and forced many Palestinian business owners to close shop and move to Ramallah or other Palestinian neighbourhoods on the other side of the wall. Many Palestinian Jerusalemites also prefer to do their shopping in the West Bank, or in West Jerusalem, where prices are lower.

While Palestinians constitute 39 percent of the city’s population today, almost 80 percent of East Jerusalem residents, including 85 percent of children, live below the poverty line.

“How could you develop [an] economy if you don’t control your resources? How could you develop [an] economy if you don’t have any control of your borders?” said Zakaria Odeh, director of the Civic Coalition for Palestinian Rights in Jerusalem, of “this kind of fragmentation, checkpoints, closure”.

“Without freedom of movement of goods and human beings, how could you develop an economy?” he asked.

“You can’t talk about independent economy in Jerusalem or the West Bank or in all of Palestine without a political solution. We don’t have a Palestinian economy; we have economic activities. That’s all we have,” Odeh told IPS.

Israel’s separation barrier alone, according to a new report by the United Nations Conference on Trade and Development (UNCTD), has caused a direct loss of over one billion dollars to Palestinians in Jerusalem, and continues to incur 200 million dollars per year in lost opportunities.

Israel’s severing and control over the Jerusalem-Jericho road – the historical trade route that connected Jerusalem to the rest of the West Bank and Middle East – has also contributed to the city’s economic downturn.

Separation of Jerusalem from West Bank

Before the First Intifada (Arabic for “uprising”) began in the late 1980s, East Jerusalem contributed approximately 14 to 15 percent of the gross domestic product (GDP) in the Occupied Palestinian territories (OPT). By 2000, that number had dropped to less than eight percent; in 2010, the East Jerusalem economy, compared to the rest of the OPT, was estimated at only seven percent.

“Economic separation resulted in the contraction in the relative size of the East Jerusalem economy, its detachment from the remaining OPT and the gradual redirection of East Jerusalem employment towards the Israeli labour market,” the U.N. report found.

Decades ago, Israel adopted a policy to maintain a so-called “demographic balance” in Jerusalem and attempt to limit Palestinian residents of the city to 26.5 percent or less of the total population.

To maintain this composition, Israel built numerous Jewish-Israeli settlements inside and in a ring around Jerusalem and changed the municipal boundaries to encompass Jewish neighbourhoods while excluding Palestinian ones.

It is now estimated that 90,000 Palestinians holding Jerusalem residency rights live on the other side of the separation barrier and must cross through Israeli checkpoints in order to reach Jerusalem for school, medical treatment, work, and other services.

“Israel is using all kinds of tools to push the Palestinians to leave; sometimes they are visible, and sometimes invisible tools,” explained Ziad al-Hammouri, director of the Jerusalem Centre for Social and Economic Rights (JCSER).

Al-Hammouri told IPS that at least 25 percent of the 1,000 Palestinian shops in the Old City were closed in recent years as a result of high municipal taxes and a lack of customers. “Taxation is an invisible tool…as dangerous as revoking ID cards and demolishing houses,” he said. “Israel will use this as pressure and as a tool in the future to confiscate these shops and properties.”

Prime Minister Benjamin Netanyahu is negotiating a deal with Washington under which Israeli building in existing Jewish settlements could go forward in certain cases, Israeli and Western officials said on Tuesday.

In talks with U.S. President Barack Obama's Middle East envoy, Netanyahu has asserted that his government does not have the legal authority to stop building in cases in which tenders for new structures have already been awarded or when homes under construction have already been purchased.

"I'm confident that we will be able to reach an agreement in the near future that will enable us to put the settlement issue aside and to move forward to what I regard as far more substantive issues in the peace process," Michael Oren, Israel's newly appointed ambassador to Washington, told Reuters.

Under pressure from Obama, Netanyahu this week publicly accepted for the first time the internationally backed goal of Palestinian statehood, but set a series of pre-conditions that were rejected by the Palestinians.

Netanyahu has refused to accept Obama's direct call for a full settlement freeze in the Israeli-occupied West Bank, defending building in existing blocs to accommodate growing Jewish settler families, known as "natural growth."

Palestinian President Mahmoud Abbas has demanded a halt to all building, including natural growth, as a condition for resuming stalled peace negotiations with Israel.

"It's not about tenders. It's not about technicalities. Any kind of settlement activity undermines the two-state solution," said senior Palestinian negotiator Saeb Erekat. "I don't think the Americans will buy this."

"CREATIVE" PROPOSALS

Oren, in an interview in Jerusalem, said he could not provide details about what an agreement with Washington would entail. He said "creative" proposals have been presented by both the Netanyahu and Obama administrations to narrow differences, and asserted Israel's ability to halt all building was limited.

"This is a country of law, and citizens of the state of Israel have rights under that law," Oren said. "If a person has purchased a house, if a person has taken out a contract for building a house, if a corporation is involved in a construction activity, the Israeli government does not have a right under Israeli law to stop them."

"If it tries to, they will appeal to the (Israeli) supreme court and, my guess is, the supreme court will view in favor of those appellants," Oren added.

U.S. officials in the region had no immediate comment but a senior Western official said some in Washington were "sympathetic" to Netanyahu's position. A full settlement freeze could break up the prime minister's right-leaning coalition.

In an interview with Israel Radio, Israeli Foreign Minister Avigdor Lieberman cited "understanding" among U.S. and European leaders about Israel's "basic demand to allow at least natural growth" in settlements.

But British Prime Minister Gordon Brown, in a telephone conversation with Netanyahu, called for a "complete freeze" in line with a 2003 U.S.-backed peace "road map," his office said.

In an interview with U.S. television, Netanyahu said he would meet Obama's Middle East envoy, George Mitchell, during a visit to Europe next week to discuss settlements, and that he hoped to find "a common position."

A senior Western diplomat said Washington's focus was shifting somewhat, from the highly contentious settlement issue to ways to restart negotiations with the Palestinians.

One option under consideration by the Obama administration would be to expedite Israeli-Palestinian negotiations over the borders of a future Palestinian state, the diplomat said.

If a deal were to be reached on borders, construction could continue in those areas which would remain under Israeli control. Israel wants to keep major settlement blocs.

A day after President Barack Obama told Israel its key ally would no longer tolerate building settlements in the West Bank, the European Union was considering using its trade clout to bolster U.S. pressure, diplomats said.

The EU is the Jewish state's biggest trading partner and one option it may have is to crack down on fruit, vegetables, olive oil and other farm produce grown by Israeli settlers on occupied Palestinian land.

Some European governments have long suspected such products are entering the EU at low import tariffs reserved for output labeled as coming from Israel proper.

It was the latest sign of the depth of the dispute between Prime Minister Benjamin Netanyahu's government and its closest allies.

In Washington, Secretary of State Hillary Clinton hit back hard at comments by a senior Israeli negotiator who said Obama's predecessor George W. Bush privately agreed to expansion of settlements. That was not U.S. policy, she insisted.

At the same time, there was no sign of a change of heart by Netanyahu's two-month-old government, a coalition that includes right-wing groups attached to expanding the colonization of the West Bank.

That leaves Israel and the powers that have been its principle sponsors more deeply at odds than in many years.

"The Israelis are listening," one European diplomat said.

"But there is no sign that the Israelis have any intention of stopping. So what next?"

A senior Israeli diplomat said Israel was still trying to figure out how seriously to take the threats: "The question in our minds is: How much staying power does Obama have?"

Obama's landmark address to the Muslim and Arab world in Cairo on Thursday dominated Israeli media.

Much attention was paid to his declaration that all further settlement building was not "legitimate" in American eyes and his call for a Palestinian state -- both elements that Netanyahu has not wished to accept.

So U.S. and EU diplomats are discussing "pressure points" that could be used to persuade the prime minister, who risks seeing his coalition break down if he makes concessions. Envoys may meet on Wednesday to coordinate a response, diplomats said.

EU-ISRAEL TRADE

Aside from the possibility of a concerted push to deny tariff concessions to settlement produce coming into the European Union, diplomats said EU nations also were looking at using economic and scientific research exchanges with Israel as an area where they could apply leverage on Netanyahu.

In addition to being Israel's largest market for exports, the EU is its second largest source of imports after the United States.

But diplomats said Europe would follow Washington's lead. Concerted EU action will be difficult because of divisions within the bloc so piecemeal steps are more likely, they added.

Israeli President Shimon Peres, a former left-of-center prime minister, sought to play down differences with Obama. "I think, basically, we accept his vision," he said.

Other Israeli officials said Netanyahu had no intention of freezing all settlement activity but would try to ease friction by removing roadblocks that make travel difficult for Palestinians and by removing small Jewish outposts that are not authorized by the government.

Even Netanyahu's opponents baulked at Obama's call for a full settlement freeze: "This is an illegitimate demand," said leading lawmaker Tzahi Hanegbi of the centrist Kadima party.

Obama's envoy, George Mitchell, will visit Israel and the West Bank starting on Monday. Western and Israeli officials said the White House was formulating a blueprint for a renewed peace process that could be presented to the parties early next month.

Near term, diplomats said, the Quartet of Middle East mediators -- the United States, the EU, Russia and the United Nations -- was considering stepping up public censure of Israel over settlements and home demolitions in Arab East Jerusalem.

Washington could also refrain from acting at the United Nations to thwart resolutions critical of Israel, and scale back Israel's access to American decision-making.

If the dispute drags on, Washington could withhold the bulk of what remains of loan guarantees for Israel, but a Western official said of that option: "It's a long way off."

Israel decided Wednesday against lifting its border blockade of the Gaza Strip until Hamas agreed to the release of a captured Israeli soldier, putting a longer-term ceasefire proposal by Egypt on hold.

The unanimous decision by outgoing Prime Minister Ehud Olmert's security cabinet raised the stakes in delicate negotiations over Hamas demands that Israel free up to 1,400 Palestinian prisoners in exchange for the soldier, Gilad Shalit.

A security cabinet statement said Palestinian prisoners would have to be freed to get Shalit back and that a list of names would be prepared as soon as possible for government approval. It is unclear if Israel's list will match Hamas's.

Gaza's Hamas rulers have rejected linking Shalit to an Egyptian plan for an 18-month ceasefire, under which the enclave's border crossings would be opened to materials needed for reconstruction after Israel's 22-day military offensive.

The air, sea and land bombardment, which Israel launched with the declared aim of halting rocket attacks, killed more than 1,300 Palestinians, destroyed some 5,000 homes and damaged much of Gaza's infrastructure, local officials said.

"The crossings are open and will remain open to humanitarian aid," said Olmert's spokesman, Mark Regev.

But he said Israel has decided that "any further widening will be dependent first on the release of Gilad Shalit," captured by Gaza militants in a cross-border raid in 2006. Israel says reconstruction supplies like steel and cement can be used by Hamas to build more bunkers and rockets.

Regev said the security cabinet discussed the number of prisoners Israel would be willing to swap for Shalit, but he declined to disclose any of the figures or names.

"The ministers understand full well the sort of price that releasing Gilad Shalit will require and I believe they are supportive," he said, adding that Amos Gilad, an Israeli envoy, was expected to return to Cairo shortly to continue the talks.

HAMAS DEMANDS

Hamas spokesman Fawzi Barhoum said Hamas "had no objection" to Shalit's release if Israel met the Islamist group's demands on Palestinian prisoners, but he would countenance no connection between Shalit and the proposed truce.

Israel has been reluctant to enter a ceasefire deal that would require it to keep Gaza's border crossings opening, arguing that doing so would only cement Hamas's hold on power.

Diplomats said an agreement would likely lead to the freeing of close to 1,000 of some 11,000 Palestinians in Israeli jails, short of the number demanded by Hamas.

But an Israeli official said even if Israel and Hamas agreed on a list of prisoners, they remained at odds over where they would be sent after the swap takes place.

"We want them expelled out of the country but Hamas wants them to return to their homes," either in the Gaza Strip or the occupied West Bank, the official said, referring to prisoners Israel regards as the biggest security risks.

Palestinians view prisoners held by Israel as heroes of what they see as a battle against occupation. Israel has carried out lopsided exchanges in the past, trading large numbers of Arab prisoners for its captured troops or their bodies.

Olmert said Tuesday he hoped to win Shalit's freedom before he left office but a new government that will be formed after last week's election might have to tackle the task.

Egyptian-brokered talks over a longer-term truce between Israel and Hamas in post-war Gaza will continue despite uncertainty over who will form the next Israeli government, Israeli and Hamas officials said on Wednesday.

Hamas leaders have suggested that the growing clout of right-wing Israeli parties could prevent outgoing Israeli Prime Minister Ehud Olmert from closing a deal.

Tuesday's election in Israel ended in a political stalemate that could take weeks to sort out. Centrist Tzipi Livni, who has taken over from Olmert as leader of the Kadima party, has a narrow lead. But right-winger Benjamin Netanyahu seemed to many to have a better chance of forming a new coalition government.

Israeli officials, speaking on condition of anonymity, said talks in Cairo over the proposed 18-month truce would not be put on hold while Livni and Netanyahu fight it out to be nominated as premier by President Shimon Peres.

"The current government headed by Ehud Olmert has full authority until a new government is sworn in. You cannot have a power vacuum," a senior Israeli official said.

Egypt has proposed a staged process beginning with a ceasefire declaration, a deal to exchange prisoners, the opening of Gaza's border crossings with Israel and with Egypt and reconciliation talks between rival Palestinian factions.

If finalized, it would take the place of a shaky January 18 truce, declared unilaterally by both sides, after Israel's 22-day military offensive in the Hamas-ruled Gaza Strip in which about 1,300 Palestinians were killed. Fourteen Israelis have died since December 27, when the fighting broke out.

Since a ceasefire in the Gaza Strip would be a bilateral arrangement between Israel and Egypt, the senior Israeli official said the next government would have to abide by it.

HAMAS QUESTIONS

Osama Hamdan, Hamas's representative in Lebanon, said Olmert's government had made clear to Egypt that it wants negotiations to continue. But he questioned whether such an agreement would be binding on the next government, particularly if it is headed by Netanyahu.

"There is no doubt that we are watching things closely and with caution," Hamdan said.

Hamas spokesman Fawzi Barhoum said the group was awaiting Israel's position on some of the sticking points in the talks.

Israeli and Palestinian officials have sent mixed signals about the status of prisoner swap talks, which would be expected to intensify after the proposed ceasefire took hold.

Hamas has demanded that Israel release 1,400 Palestinian prisoners in exchange for Gilad Shalit, an Israeli soldier captured by Gaza militants in a cross-border raid in 2006. Diplomats said Israel was likely to free closer to 1,000.

Under the proposed ceasefire, Israel would open border crossings with the Gaza Strip, but it was unclear how soon and under what conditions. Olmert has hinged a full opening of the crossings on Shalit's release and has refused to offer Hamas guarantees that the passages will stay open.

Another sticking point has been Israel's insistence that certain materials be barred from entry because they could be used to make rockets, fortifications and explosives. These include certain types of steel piping and chemicals used in agriculture, Israeli defense officials said.

Hamas officials say they have demanded details about what would be excluded from entering the impoverished enclave, which will require massive amounts of steel, cement and other commercial goods to rebuild after the war.

Egypt and Israel have balked at Hamas demands that the terms of the deal be put in writing.