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A way forward? U.S. special envoy George Mitchell speaks to reporters ahead of next week's talksKEVIN LAMARQUE/Reuters

The announcement of the resumption of direct Israeli-Palestinian talks has been greeted by an indifferent Israeli public. Politicians and pundits lamented the effort as yet another futile exercise in diplomacy, the product of hopeless American naiveté. "Nothing will come out of it," has been the common reaction, based on countless examples of past negotiations that began in high-profile ceremonies only to end in despair, if not in another round of hostilities.

I beg to differ. Changes in the political environment give peace a better chance. Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority president Mahmoud Abbas, herded by their U.S. custodian, President Barack Obama, can reach a deal on the establishment of a Palestinian state within the next year. It requires patience and creativity, but it's possible. Low expectations have their virtues, too: They serve as a cushion protecting negotiators from performance anxiety, reducing the risk of disappointment-driven blow-ups.

In his second term, Mr. Netanyahu is strong inside and weak outside. Facing no serious challengers, he enjoys political strength like no predecessor in the past generation. Improved security and an excellent economy support a quiet home front. Looking out the window, however, Mr. Netanyahu sees dark clouds surrounding Israel. The country is increasingly isolated, facing a global fatigue over its endless conflict with its neighbours, and a consensus against occupation, settlement expansion and excessive use of military force. And on the horizon, Iran's nuclear project is looming.

Mr. Netanyahu returned to power chiefly to save Israel from the "existential threat" posed by Iran. In this environment, he must rely on the United States, Israel's closest ally and strongest protector. Only Mr. Obama can save Israel from the wrath of Mahmoud Ahmadinejad. But this protection comes with a price: a Natanz-for-settlements tradeoff.

Mr. Netanyahu understands that. Whatever ideological and policy differences he has with Mr. Obama, whenever faced with a U.S. dictate, Mr. Netanyahu obeyed. Thus he accepted the "two-state solution" despite having fought against the idea throughout his career; declared a 10-month moratorium on West Bank settlement expansion; slowed down controversial construction in east Jerusalem; and eased the siege of Gaza after the botched Turkish flotilla incident.

The international media portray Mr. Netanyahu's government as "hard line," but examining its actions shows a different picture. The current Israeli government is the most dovish since Yitzhak Rabin's assassination 15 years ago. Mr. Netanyahu has been reluctant to use military force, and has slowed settlement growth. Security and economic co-operation with Mr. Abbas's Palestinian Authority is as strong as ever, while Palestinian Prime Minister Salam Fayyad is making progress in his bottom-up state-building progress.

Sponsoring the resumed peace process has been a key Obama administration goal and, despite a bumpy start, Mr. Obama succeeded in bringing Mr. Abbas and Mr. Netanyahu to the table - starting next week in Washington.

The politically weak Mr. Abbas has been reluctant to join the process, insisting on indirect talks. But Mr. Netanyahu outmanoeuvred him to sit face to face, and now offers him biweekly meetings to discuss the "core issues" of a final deal. To this day, the Palestinian side rejected all Israeli peace offers as not good enough. But Mr. Abbas may run out of excuses to say "no" when a friendly president such as Mr. Obama sits in the White House.

These positive indicators notwithstanding, there are serious obstacles at play. Mr. Netanyahu and Mr. Abbas mistrust each other, their opening positions are wide apart, and both are facing strong anti-compromise constituencies at home. Mr. Obama is committed to Mideast peacemaking, but re-election is higher on his agenda. Moreover, Israelis doubt his support for the Jewish state and his willingness and ability to confront Iran.

To reach an agreement, negotiators must break away from dead-end paths and seek a different approach. Rather than deploying an "all or nothing" strategy, they should slice the deal's components into smaller, more politically digestible pieces. This can be achieved, for instance, through separating practical issues such as borders and security from "narrative issues" such as the Palestinian refugees and recognition of Israel as "the state of the Jewish people," as Mr. Netanyahu demands.

Within a month, the nascent peace process will face its first challenges, as the Israeli settlement moratorium expires. Mr. Netanyahu seeks a compromise that would keep his coalition together and Mr. Abbas at the table. If this milestone is passed, talks can proceed quietly into next summer's deadline - which coincides with the U.S. intelligence assessment of Iran's timetable to its first nuclear device. Next August, then, will be a time of decisions in the Middle East - over Iran's nukes and an independent Palestine.

Aluf Benn is editor-at-large of the Israeli daily Haaretz.

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