Bruce Anderson: Israel is trapped, and the chance of peace is ever more remote

A crass failure of moral sensitivity has led to equally crass strategic misjudgment

While the West is preoccupied with a crisis, a tragedy is unfolding. The world's financial system will recover. On the Israel/Palestine peace process, there can be no comparable optimism, for it is not clear whether such a process still exists. No process, no peace; a settlement is further away now than at any time since 1967. Israel seems bent on a course which will lead to its eventual destruction.

There is a hideous irony. The way that events are unfolding is a posthumous triumph for Adolf Hitler. With the winding-up of the Soviet Union, the last of the poisons created by the Second World War could be eliminated from the European bloodstream. Not the Middle Eastern one. It is easy to understand why the Israelis reacted as they did. Once you have suffered a Holocaust at the hands of the race which produced Beethoven, Goethe and Mozart, you lose trust in mankind's benevolence: lose faith in everything except your own soldiers and weaponry.

It is equally easy to understand why the Palestinians reacted as they did. Those who are driven into exile and refugeedom do not feel well-disposed towards their oppressors. The Palestinians felt no linguistic inhibitions, and why should they? They bore no guilt for the Holocaust. In the grip of – understandable – rage, some Palestinian rhetoric developed Nazi resonances. That was a mistake. It aroused every Israeli trauma. We have been here before, many Israelis concluded. This time, no one is going to herd us to our death like cattle. This time, we will get our retaliation in first.

Because of the circumstances in which their Jewish state was created, most Israelis believe that they have two existential necessities, and entitlements. They want to enjoy security and they insist that their neighbours recognise their rights to do so. That does not seem unreasonable. But it is. It fails the highest test of political rationality. It is not realistic.

This does not mean that Israelis should have to live in bomb shelters under constant risk of attack. But they have chosen to live in a dangerous neighbourhood, so there must be compromises. Instead of the delusion of absolute security by imposing a humiliating peace on crushed opponents, Israel should understand the need for a modus vivendi.

Israelis are proud of their achievements over the past 60 years, and rightly so. But most of them are guilty of a crass failure of moral sensitivity leading to an equally crass strategic misjudgment. They fail to understand that their security will always be under threat from their neighbours' misery. Above all, their leaders lack the political wisdom and the moral courage to tell Israelis something which most probably know in their hearts: that to make peace, they will have to take risks.

The first act of the current tragedy began in 1967, after the Six-Day War. Plucky little Israel was master of the battlefield. She had overrun a vast acreage of Arab territory. Almost immediately, even by those who had never been enthusiastic about the State of Israel, distinctions began to be drawn between the pre-'67 boundaries and the 1967 conquests. Israel had a tremendous hand of cards, strategic and moral. There was never a better moment for "in victory, magnanimity".

Israel should have announced that unlike almost every previous military victor, she did not seek territorial gains; her sole war aims were peace and justice. To secure them, she was prepared to trade her conquests, with the obvious exception of the Holy Places in old Jerusalem. On such a basis, and with huge international support, a deal would have been possible. But there were problems. At its narrowest point, pre-'67 Israel was only 12 miles wide. A tank thrust from the West Bank could have cut the country in two. Although the generals cannot be blamed for failing to predict the era of asymmetric warfare in which tank thrusts would only occur in war movies, their insistence on a demilitarised West Bank complicated matters. Then a temptation emerged, like the serpent in the Garden of Eden.

Israel was short of land. Much of the West Bank seemed to be inhabited by raggedy goatherds, primevally picturesque, poor and unproductive. Israeli agriculture would soon have the place flowing with milk and honey, while Israeli architects built new homes for a growing population. So the settlements began. The temptation to colonise the occupied territories was abetted by theology. Under the Jehovah declaration, somewhat preceding the Balfour one and also somewhat more extensive, historic Israel was said to include the West Bank. Israel ate the apple.

In order for Israel's pre-'67 Promised Land to be secure, most of the settlements would have to be evacuated, so that a viable Palestinian state could come into existence. It would always have been virtually impossible to generate the political will for this in Israel. Last week's election results eliminated the "virtually".

Even if it wished to do so, which seems unlikely, the new Israeli government could make no progress towards a Palestinian state. Because of its rigidly proportional electoral system, Israel will be condemned to weak governments blackmailed by extremist parties. The imperative to reach a just peace with Palestine will have no leverage on Israeli domestic politics.

A prosperous Palestinian state would not guarantee Israel's safety. Some young men would still be enticed by fanaticism and violence. But the problem would be much more manageable. If most Palestinians had a stake in a decent future, there would be many fewer suicide bombers – and the '67 vintage Israeli generals were right on one point. Theirs is a tiny country. The first WMD suicide bomber would do terrible damage.

Over the years, Israel has proved that it can deal with conventional threats. Like the rest of us, it is now working out how to cope with terrorism and asymmetric warfare. Israeli opinion would angrily reject any answers that smacked of appeasement. But a Palestinian state is justice, not appeasement. There are alternatives. Israel could abandon the pretence of a two-state solution and offer the Palestinians Israeli citizenship: the end of the Jewish state. Or she could try ethnic cleansing: drive the Palestinians into Jordan. That would be the end of the Jewish state as a moral entity.

Assuming the alternatives to be unacceptable, there is only justice, or continued muddle, with a sullen, resentful Palestinian population awaiting inflammation. That, alas, is almost a certainty, and who knows how far the flames will spread? Israel is a wonderful place, with landscape, culture, increasingly good wine and as much political argument as you can hold. The country emerged out of tragedy. It would be heart-rending if its heroic journey ended in tragedy. Yet that is the likeliest outcome, and it would be Israel's fault.