Mr Arafat rules a quasi-state with control over most of Gaza and part of the West Bank. But the Palestinian areas remain islands in an Israeli sea. In terms of access they are more like besieged cities. In Gaza last year, carnations were fed to donkeys because Israel would not allow export of the local flower crop.
But the Palestinian enclaves are not impotent Bantustans. Mr Arafat has 35,000 men under arms. Benjamin Netanyahu, the Israeli prime minister, could not reoccupy Gaza and the West Bank towns without a fight. Yet Mr Netanyahu has produced a map according to which Israel will keep 60 per cent of the West Bank. In effect, the Israeli leader is telling Israelis that the balance of power with the Palestinians is so favourable to them that Israel can have its cake and eat it. It can force Mr Arafat to give Israel security, without its ending the occupation of most of the territories it captured in 1967.
The fighting last September, when Israel opened a tunnel under the Muslim quarter of Jerusalem, seemed to give Mr Netanyahu pause. In January Israel, under pressure from the US, withdrew from most of Hebron. But with the start of construction of a new Jewish settlement in Jerusalem at Har Homa, called Jabal Abu Ghneim by Palestinians, negotiations and security co- operation have ceased.
Mr Arafat is left with a choice between consolidation and confrontation. He could try to sit out the next three years of Mr Netanyahu's government and try to consolidate Palestinian strength in the areas he already controls. The problem is that these areas are small. They can be sealed off by Israel at will. The expansion of Israeli settlements is establishing fresh facts on the political landscape that may never be eradicated. Mr Arafat thus has little choice but to opt for confrontation.
The Oslo peace accords between Israel and the Palestinians in 1993 were not simply the outcome of a surge of Israeli goodwill. The agreement came primarily because of the Palestinian uprising. Israel realised that continued, undiluted occupation meant living with a low-level, ongoing rebellion.
But confrontation is dangerous for the Palestinians. There is the great disparity in military strength between them and the Israelis. The Arab world is weaker and more divided than any time since the Second World War. The US still monopolises international mediation between Arabs and Israelis, and President Clinton, despite his personal dislike of Mr Netanyahu, has shown himself unwilling to put any pressure on Israel to abide by the Oslo accords.
So what can Mr Arafat do? His critics hold that he cannot mobilise ordinary Palestinians because his regime has been discredited by its corruption and brutality. "We Palestinians have got a police state even before we've got a state," says one cynical Palestinian observer in Hebron. The money made by Mr Arafat's entourage through control of monopolies is deeply resented by ordinary Palestinians. But they also believe that, even if their leaders were of pristine honesty, it would make limited difference. The income of an ordinary Palestinian in the occupied territories has fallen by 39 per cent since Oslo, primarily because of the Israeli closures.
The dilemma for Mr Arafat is that a confrontation with Israel is likely to come, whether he wants it or not. And when it does it is increasingly likely that Mr Netanyahu will order tanks into parts at least of the Palestinian enclaves, igniting a wider conflict in the occupied territories.
An Israeli commentator compares the present mood in Israel to that just before Menachem Begin, the former Israeli prime minister, launched the invasion of Lebanon in 1982. Like Mr Netanyahu, he believed that he could deal with the Palestinian problem by military means. Then as now, many Israelis could see the flaws in this idea, but did little about it until it was too late. The collapse of Oslo has so far created few ripples in Israel because it has had no unpleasant consequences for Israelis. This is likely to change quite soon.Reuse content