Donald Macintyre: A flurry of diplomacy, but outcome remains uncertain

If nothing else, the Palestinian President Mahmoud Abbas's plan to apply for UN membership as a state has ensured an abnormally intense level of intercontinental diplomatic agitation. This week's shuttling between Jerusalem and Ramallah by the US officials David Hale and Dennis Ross, Tony Blair, envoy to the Middle East "Quartet" and EU representative Catherine Ashton, is only the most visible evidence of the hand-wringing in Western capitals over how to handle the Palestinian initiative.

With little tangible result so far. The Americans and Mr Blair have been trying to persuade Mr Abbas to accept a new formula designed to restart direct Israel-Palestinian negotiations, which Washington hoped would be enough for the Palestinian President to abandon – or at least defer – a UN application which Israel vehemently opposes.

The proposal Mr Blair put to Mr Abbas on Wednesday was for a one-year timetable for concluding a peace agreement on a Palestinian state. The terms of reference would be based, firstly, on pre-June 1967 borders with land swaps in return for those Jewish settlements allocated in any agreement to Israel (which the Palestinians have long said they can live with). Secondly, as the Israelis have been insisting, the borders would therefore not be the same as they were up to June 1967. The issue of UN membership would await the outcome of the negotiations.

Ingenious as this sounds, the Palestinians had several problems with it, apart from its failure to grant them the settlement freeze they have demanded. While the formula foreshadowed full future withdrawal by Israel from the Occupied Territories, it also said the outcome would have to meet the "needs of both sides" – which the Palestinians read as referring to the Israeli Prime Minister Benjamin Netanyahu's requirement for a long-term Israeli military presence in the Jordan Valley.

Secondly, while envisaging full UN membership after a successful negotiation, the draft text was silent on what would happen if the talks failed. The Palestinians could no doubt start the UN ball rolling again, but there was no promise that the US would not again veto it, especially just before a presidential election. And that mattered, given the third problem, namely the strong Palestinian conviction that Mr Netanyahu's right-wing coalition is in no mood to grant them the minimum they could accept, on borders, Jerusalem and refugees, as long as it is in office, let alone within a year.

The other track was to try to devise a UN resolution which would avert a full-scale collision between the Palestinians, and the US and Israel in New York next week. It would also relieve EU governments, including Britain's, of having to choose between them.

Mr Netanyahu had indicated that he was ready to support the upgrading of the Palestinians' UN membership but not as a "state". This ruled out Vatican-style "non-member state" status, which Israel fears would allow the Palestinians to take complaints to the International Criminal Court. Baroness Ashton floated that limited upgrading to the Palestinians, but so far without traction.

The action will now move to New York. Up to now diplomats have assumed that without a negotiating formula the Palestinians would in the end seek Vatican status via the General Assembly where they are guaranteed a built-in majority. But while the US cannot veto that, it has repeatedly threatened the Palestinian Authority that Congress could cut its funding. So, under such pressure, there is another option of doing what Mr Abbas said he would last night and seeking full UN membership, but with it then being considered by a 15-member committee of the Security Council over many months – so postponing the crunch moment.

We may not even know the final outcome until both Mr Netanyahu and Mr Abbas each go to the podium on Friday on one of the highest profile days in the General Assembly's history.