"Palestine" is no more. Call it a "peace process" or a "road map"; blame it on Barack Obama's weakness, his pathetic, childish admission – like an optimistic doctor returning a sick child to its parents without hope of recovery – that a Middle East peace was "more difficult" to reach than he imagined.

But the dream of a "two-state" Israeli-Palestinian solution, a security-drenched but noble settlement to decades of warfare between Israelis and Palestinians is as good as dead.

Both the United States and Europe now stand idly by while the Israeli government effectively destroys any hope of a Palestinian state; even as you read these words, Israel's bulldozers and demolition orders are destroying the last chance of peace; not only in the symbolic centre of Jerusalem itself but – strategically, far more important – in 60 per cent of the vast, biblical lands of the occupied West Bank, in that largest sector in which Jews now outnumber Muslims two to one.

This majority of the West Bank – known under the defunct Oslo Agreement's sinister sobriquet as "Area C" – has already fallen under an Israeli rule which amounts to apartheid by paper: a set of Israeli laws which prohibit almost all Palestinian building or village improvements, which shamelessly smash down Palestinian homes for which permits are impossible to obtain, ordering the destruction of even restored Palestinian sewage systems. Israeli colonists have no such problems; which is why 300,000 Israelis now live – in 220 settlements which are all internationally illegal – in the richest and most fertile of the Palestinian occupied lands.

When Obama's elderly envoy George Mitchell headed home in humiliation this week, Israeli Prime Minister Benjamin Netanyahu celebrated his departure by planting trees in two of the three largest Israeli colonies around Jerusalem. With these trees at Gush Etzion and Ma'aleh Adumim, he said, he was sending "a clear message that we are here. We will stay here. We are planning and we are building." These two huge settlements, along with that of Ariel to the north of Jerusalem, were an "indisputable part of Israel forever."

It was Netanyahu's victory celebration over the upstart American President who had dared to challenge Israel's power not only in the Middle East but in America itself. And while the world this week listened to Netanyahu in the Holocaust memorial commemoration for the genocide of six million Jews, abusing Iran as the new Nazi Germany – Iran's loony president supposedly as evil as Hitler – the hopes of a future "Palestine" continued to dribble away. President Ahmadinejad of Iran is no more Adolf Hitler than the Israelis are Nazis. But the "threat" of Iran is distracting the world. So is Tony Blair yesterday, trying to wriggle out of his bloody responsibility for the Iraq disaster. The real catastrophe, however, continues just outside Jerusalem, amid the fields, stony hills and ancient caves of most of the West Bank.