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.”

U.S. President Barack Obama telephoned Palestinian Authority President Mahmoud Abbas yesterday to try to persuade him to withdraw or soften the ultimatum he intends to send to Prime Minister Benjamin Netanyahu. This was the first conversation between the two since their relations soured half a year ago.

But Haaretz has learned that Abbas did not assent to the American president's request, vowing to deliver the letter to Netanyahu in the coming days.

Both a senior Palestinian official and a Western diplomat briefed about the conversation said that Obama emphasized his continued commitment to the peace process and the establishment of a Palestinian state, insisting he was just as committed now as he was on his first day in the White House. He told Abbas that at his White House meeting with Netanyahu two weeks ago, the two discussed the peace process at length, including the progress of the Israeli-Palestinian talks held in Amman under Jordanian auspices.

He therefore urged Abbas not to incorporate a threat to dismantle the Palestinian Authority in the letter.

But Abbas responded that he intends to send Netanyahu the letter in the next few days. In it, he will blame Israel for the impasse in the peace process and stress that "the current situation cannot continue."

Abbas told Obama that the Palestinians are prepared to return to talks with Israel should it accede to the Quartet's demand that it present clear positions on borders and security. He also complained to Obama about the continuation of settlement construction in the West Bank, and about attacks by settlers against Palestinians.

A senior Palestinian official told Haaretz that following this discussion with Obama, the PA president is determined to deliver the ultimatum to Netanyahu in the next few days. A senior Israeli official who deals with Palestinian issues said it is unlikely that international pressure will prevent Abbas from sending the letter, but it might persuade him to soften his language and excise the threat of dismantling the PA.

Drafts of the Abbas letter that were leaked to the Palestinian media suggest he will say that the PA's establishment was intended as an interim stage, one which would allow the Palestinians to transition from occupation to political independence. But in reality, Abbas will complain, Israel has emptied the PA of all authority and turned it into a useless entity.

In recent weeks the Foreign Ministry, Military Intelligence, the Shin Bet security service and the Mossad have distributed a number of documents stating that a return to negotiations would tone down tensions and anger against Israel.

The documents, issued ahead of the expected UN vote on a Palestinian state, also state that while changes in the Arab world could be a threat to Israel, they also represent opportunities for Israel to improve its diplomatic standing.

"All the documents recommend progress vis-a-vis the Palestinians," a source close to Defense Minister Ehud Barak said.

In recent meetings of the eight senior cabinet ministers, Barak told Prime Minister Benjamin Netanyahu and the other ministers that the focus should be on Israel's interests and not on symbolic issues like national honor. If Israel does not try to seriously move the peace process ahead, it will be seen as obstructionist by its friends in the West, Barak told the ministers.

"By sharpening tensions with the Palestinians, we are inviting isolation on Israel," Barak also told the octet.

Barak believes the security cabinet should not to be dealing with tactical matters such as an apology to Turkey or evacuating the embassy in Cairo, but with strategic issues involving Israel's standing in the region. "The signs are there; afterward we'll have to ask ourselves what we could have done differently," Barak said in closed conversations.

Meanwhile, France and Spain, along with the European Union's high representative for foreign affairs and security policy, Catherine Ashton, are in advanced stages of negotiations with the Palestinian Authority over a "package deal" that will enable the 27 member states of the EU to vote at the United Nations General Assembly in favor of upgrading the PA to the status of a non-permanent member of the UN.

The Europeans are also trying to gain the United States' agreement to abstain from the vote and continue its financial aid to the Palestinians, in return for a promise by PA President Mahmoud Abbas not to take Israel to the International Criminal Court in The Hague.

Three senior European diplomats involved in the negotiations told Haaretz that the PA president had informed the EU of his decision not to turn to the UN Security Council on September 20 and request that Palestine be accepted as a full member of the organization.

Abbas, who realizes that the United States will exercise its veto power at the Security Council, has decided to turn to the UN General Assembly, whose resolutions are less binding, in order to seek the support of the European Union member states in the vote.

Abbas is expected to meet in Cairo today with Ashton, who is in charge of the EU's foreign policy, and with the foreign ministers of the Arab League Monitoring Committee. During both meetings the diplomatic deal being worked out will be discussed.

Among the elements included in the package being negotiated are the following:

a. The Palestinians will ask the UN General Assembly to upgrade their standing to something similar to that of the Vatican, which has permanent observer status at the international body. This will enable the Palestinians to be full members in a series of international organizations.

b. A large block of the 27 member states of the EU will vote in favor of the resolution, but the resolution will include a clause stating that the vote does not require that each state recognize the Palestinian state on a bilateral level. This is a critical condition for gaining the support of Germany and Italy to the vote. It is assumed that if this is accepted, at least 20 of the 27-member block will vote in favor of the resolution.

c. The Palestinians will commit to resuming negotiations with Israel immediately following the vote at the UN, without any preconditions.

d. The wording of the resolution the Palestinians will bring before the General Assembly will be balanced and will combine elements of the speeches of U.S. President Barack Obama of May 19, 2011, and the conclusion of the EU's Foreign Affairs Council of December 2009. In other words, the negotiations will be held on the basis of the 1967 borders with an exchange of territory and a statement according to which the EU will be ready to recognize the Palestinian state "at an appropriate time."

Meanwhile, France and Spain, along with the European Union’s high representative for foreign affairs and security policy, Catherine Ashton, are in advanced stages of negotiations with the Palestinian Authority over a “package deal” that will enable the 27 member states of the EU to vote at the United Nations General Assembly in favor of upgrading the PA to the status of a non-permanent member of the UN.

In parallel, the Palestinians are holding consultations with Germany, Britain and Italy on an agreed wording for the resolution, which would enable the three large EU member states to vote in favor. Spanish and French diplomats noted that they are very close to achieving an understanding with the Germans.

Ashton and the five large EU countries are keen to avoid an internal European division over the issue. "We will do everything possible not to isolate Germany," European diplomats said.

A senior German diplomat did not deny the developments and said that his country is interested in a "package deal" with the Palestinians on a balanced resolution.

An internal report of the Office of Inspector General for the U.S. Department of State recommends terminating the U.S. loan guarantee program to Israel at the end of 2011.

The report, which deals with the performance of the U.S. embassy in Israel, says American diplomats have difficulty mustering support for the Obama administration's policies and implies the embassy failed completely in its PR efforts during the Obama administration.

"A fragile Israeli coalition government leans toward the views of its members from the nationalist and religious right, creating a challenge for diplomats seeking to build support for U.S. policies," the report says.

The unclassified version of the report was distributed in the State Department in March. At the same time the OIG released a report about the Consulate General Jerusalem. Haaretz has obtained copies of both reports, whose findings are published here for the first time.

The State Department's comptroller's team came to Tel Aviv in October 2010 and spent two weeks talking to its American diplomats.

The reports portray a problematic picture of the missions' performance in Israel.

The Tel Aviv embassy faces intense challenges, generated by Israel's current government, negative public opinion toward President Obama, a sensitive political environment and a vibrant media scene, the report says.

It finds that the embassy's annual public relations budget, intended to influence public opinion in Israel, is about $7 million a year, or roughly NIS 25 million.

Despite its diplomatic wording, the report implies the Tel Aviv embassy has totally failed in its public relations efforts during the Obama term. "Much of the Israeli public is suspicious of U.S. efforts to promote negotiations aimed at establishing an independent Palestinian state," it says. "The lively and fractious press often misinterprets American policies."

One of the main issues the OIG team dealt with on its visit in Tel Aviv was the loan guarantee package the United States granted Israel in 2002. The Americans gave Israel loan guarantees of up to $9 billion in world banks to help its economy over the recession.

A condition of the guarantees was that Israel would not use the money for construction in the settlements. The OIG report says the embassy "devotes considerable time to monitoring Israel's compliance with conditions in the loan guarantee agreements," especially as the program has "accomplished its purpose - stabilizing Israel's economy."

"Planning should begin now for [the loan-guarantee program's] orderly termination," the report says. "Israel has been admitted to the Organization for Economic Cooperation and Development, an indication that it is now a modern, self-sufficient economy capable of supporting its citizens as an industrialized country. The OIG team found a broad consensus that the loan guarantee program can prudently be terminated in accordance with the sunset clause in the original legislation, which provided that it would end by 2011."

The report on the Consulate General Jerusalem, which is in charge of relations with the Palestinian Authority, says American diplomats face considerable difficulty in obtaining in-depth information about what is happening there.

"The consulate produces strong reporting on the West Bank, where it has extensive contacts with the senior levels of the Palestinian Authority," it says. "The mission is aware that it is less successful in reporting the views of ordinary Palestinians outside Ramallah. For security reasons, those areas are more difficult and expensive to reach...."

In Gaza things are worse. Since the terror attack on American diplomats there in October 2003, the State Department has forbidden its staff to enter Gaza. "Reporting on Gaza is constrained... by the inability of U.S. diplomats to travel there...." the report says.

"Unable to travel there themselves, consulate officers rely on information from other diplomatic missions, nongovernment organizations, the media and UNRWA. They also meet with Gazan contacts outside Gaza."

Contacts with those in Gaza are maintained by telephone or mail.

After a year and a half of political stagnation and Israel's increasing international isolation, Prime Minister Benjamin Netanyahu can claim his first diplomatic achievement - even if it is a modest one.

Direct peace negotiations with the Palestinian Authority, which are set to re-launch on September 2 in Washington, will begin in accordance with the conditions on which Netanyahu insisted. However, the talks themselves will be Netanyahu's real challenge, when he will be required to make decisions regarding core issues.

Netanyahu's big achievement of the past few months has been his ability to re-direct American pressure: After more than a year of President Barack Obama leveraging heavy pressure on Netanyahu, the U.S. president has begun to apply pressure on Palestinian President Mahmoud Abbas to submit to direct peace talks.

With the help of this pressure from Obama, who has been desperate to achieve a diplomatic victory in the Middle East, Netanyahu got his wish – an American declaration of direct talks with no preconditions. This declaration, as announced by Secretary of State Hillary Clinton, put an end to the Palestinian demand that negotiations be conducted on the condition that a Palestinian state would be established with 1967 borders.

Senior officials in Jerusalem said Netanyahu had clarified to the Americans that his demand for negotiations without preconditions wasn’t only a political stance; it was also a political necessity that would enable him to keep his coalition government intact. Netanyahu had previously agreed with his partners on the right – Foreign Minister Avigdor Lieberman, as well as Minister Benny Begin and Vice Prime Minister Moshe Ya'alon – that negotiations would restart with no preconditions. Netanyahu even reiterated this stance in the decision from the forum of seven senior cabinet ministers earlier this week regarding the resumption of peace talks.

With the help of American pressure, Netanyahu also succeeded in rendering essentially meaningless the announcement Friday from the Quartet, which reaffirmed its support for the resolution of all final-status issues. The Palestinians had hoped the European Union, the UN and Russia would be able to hand them a victory by calling for a complete Israeli settlement freeze, but that also did not happen in the end.

The Americans vetoed that demand and clarified that such an announcement would back Netanyahu into a corner and torpedo the negotiations. In the end, the Quartet announcement turned into another international document that lacked bite.

Netanyahu agreed to compromise on one issue – the timetable for negotiations – which also gave the Palestinians something of an achievement. They had demanded a certain timetable in order to bridge their lack of trust regarding Netanyahu's intentions for the peace process. The Israeli premier, who for a year and a half has been trying to prove to the international community that he is a partner for peace, himself recently told the Council on Foreign Relations in New York that he believes peace can be achieved within one year. As such, Netanyahu had no problem compromising on the timetable.

Netanyahu's diplomatic victory, however, is a temporary one. U.S. envoy George Mitchell acquiesced to another of Netanyahu's requests – that talks take place with no American mediator in the room – but the administration plans to be especially active in the process. If Mitchell sees that talks stagnating or foot-dragging on Netanyahu's part, he won't hesitate to put American proposals on the table.

In addition, after the celebratory ceremony in Washington, when the essential and Sisyphean talks begin, Netanyahu will be forced to present his first stances on such issues as borders for a future Palestinian state, the status of Jerusalem and the future of the settlements. Until now, no Likud prime minister has conducted peace talks to reach a final-status agreement with the Palestinian Authority and has, therefore, never been required to seriously deal with these issues. When this moment arrives, the internal differences of opinion, in all their might, and the tension with the American administration will bubble up to the surface and may even intensify. That moment will be Netanyahu's true test.