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Despondency reigns over prospects for movement toward Israeli/Palestinian reconciliation. Barack Obama's stark words this past summer that Israel freeze settlement construction in the West Bank and east Jerusalem have gone the way of all flesh. The Palestinian Authority feels betrayed. The Israeli government is emboldened.

The Obama administration's loss of direction has dramatic consequences.

In response to Mr. Obama's June call for a total freeze, the Israelis reluctantly promised to limit themselves to 3,000 new dwellings in West Bank settlements over a nine-month period; east Jerusalem, however, would be exempt from such restrictions. This Israeli “compromise,” initially rejected by the Obama administration, was embraced by Hillary Clinton last month while she was in the region. She applauded Prime Minister Benjamin Netanyahu's offer as unprecedented, thereby accepting that Israeli resistance to the Obama plan could not be overcome.

Palestinian Authority president Mahmoud Abbas, already caught between the Islamist Hamas and the expansionist cabinet of Mr. Netanyahu, had grabbed on to the Obama settlement plan as a lifeline. He then saw it pulled back, leaving him dangling, forced to choose between acquiescence and rejection. Believing Palestinian and Arab opinion would judge him a quisling if he gave way to Israel as the Americans had, he fell back on the promised settlement freeze as a prelude to negotiations.

Feeling cut loose by the Americans, the mainstream Palestinian leadership is in disarray. Because of Washington's volte-face, Mr. Abbas has said he will not run for office again, although the scheduled January election will be postponed for reasons unconnected with the current crisis. Speculation about a successor has begun, but the candidate best capable of unifying mainstream Palestinians, Marwan Barghouti, is in an Israeli prison for his role in the second intifada.

Palestinians are beset by calls for a renewed uprising. Some activists see it as the only means of breaking the Israeli chokehold. Others place hope in a Hamas-Fatah reconciliation, enabling the creation of a single Palestinian strategy. Discussions are under way in Cairo, but whatever piece of paper might be signed, the prospect of corporeal realignment could not be less likely. Hamas and Fatah are in a brutal struggle for power, and there can be only one winner.

Mr. Netanyahu argues for negotiations without preconditions, which Mr. Abbas rejects, insisting on a settlement freeze first. Mr. Netanyahu correctly argues that the Americans have been unable to secure any Arab move toward normal relations with Israel in return for flexibility on his part. And he says the Americans have been unable to ensure a unified Palestinian approach. His partisans claim this proves just how limited U.S. influence has become.

Mr. Netanyahu has reason to be satisfied. If past is precedent, his commitment to restraint will be hedged by exceptions. The Israeli government will work hard to further accelerate the integration of those parts of the West Bank and Jerusalem that the Prime Minister intends Israel retain in perpetuity. It will use traditional means with new boldness: land expropriation, housing demolition, infrastructure expansion and control over natural resources.

U.S. decisions have empowered the settlement movement. Parts of east Jerusalem, including Sheikh Jarrah and Silwan, appear set for still more forceful integration into Israel through the inward movement of settlers, facilitated by generous financial and administrative support. More worryingly, some rumours include possible changes to the status quo on the Haram al-Sharif/Temple Mount complex within Jerusalem's Old City. This walled enclave, the Holy Land's centre of religious devotion, is the major flashpoint for renewed violence.

Mr. Obama forced the issue but could not deliver. This failure will stick. Paradoxically, it will be for the Americans to devise a survival strategy. The regional parties are either incapable or unwilling, perhaps both. In the Mideast cauldron, pessimism is almost always the optic for any given day, but the current conundrum seems a new low point. It takes great optimism, if not naiveté, to believe the aims of the two sides can be reconciled.

Michael Bell, a senior scholar on international diplomacy at the University of Windsor, is a former Canadian ambassador to Israel, the Palestinian territories, Egypt and Jordan.