Leading Article: A Palestinian state is the key to peace

A television advertisement showing Yasser Arafat walking up a staircase hand-in-hand with Shimon Peres, the Israeli Prime Minister, was repeatedly shown by the right-wing opposition during the Israeli election campaign. The same picture appeared on leaflets slipped under every door in Israel. Supporters of Binyamin Netanyahu, who won the election by just 15,000 votes out of three million, evidently believed that Mr Peres would be damaged by evidence of cordial relations with the Palestinian leader. Given the closeness of the result the film may have won them the election. How ironic, then, that this week a beaming Mr Arafat was repeatedly shaking hands with David Levy, the Israeli foreign minister, before the television cameras. It is unlikely that Mr Netanyahu himself can long avoid Mr Arafat's embrace.

Does this mean that Mr Netanyahu is a closet pragmatist rather than the ideologue he has always appeared? Are the Oslo accords, the series of agreements between Israel and the Palestinians signed since 1993, alive and well despite the defeat of Mr Peres? Could it be that the world has got Mr Netanyahu wrong? If nothing else the surge in optimism across the Middle East in the last couple of days has shown Mr Netanyahu's strength as a tactician. By doing nothing more than agreeing to implement parts of a treaty Israel has already signed he has won points for moderation. By taking an intransigent line in his visits to the US and Egypt, he has so lowered expectations that a small concession goes far.

It is easy to make too much of the negotiations. Mr Netanyahu has been conciliatory on minor issues. Some of these, like Palestinian political activity in Orient House in Jerusalem, had been built up by him during the election campaign and can be easily deflated. But on differences that will determine the relations between Israelis and Palestinians into the next century there is no sign of the Israeli leader changing his stance. He and his government reject a Palestinian state, an end to the building of Israeli settlements on the West Bank and Gaza and any compromise on Jerusalem.

If there is any reason for optimism it is that the Oslo agreements are showing signs of durability. This is because they represent a certain balance of power between Israel and the Palestinians. It is much in favour of the former, but it has become clear to Mr Netanyahu since he took office that the accords cannot discarded without provoking prolonged violence. Mr Netanyahu promised the Israeli voters that he could give them peace and security. In the one television debate of the election he accused Mr Peres of putting the security of Israeli children in the hands of Mr Arafat. As Prime Minister he has found that he has little choice but to do so himself. Within days of taking power he was informed by the Shin Bet (Israeli security) that, without co-operation with Mr Arafat and Palestinian security, bombs would start exploding in Tel Aviv and Jerusalem.

They may do so yet. Mr Arafat wants to see implemented the interim agreement with Israel which was signed last year. He wants Israel out of most of the city of Hebron on the West Bank. He wants other scheduled withdrawals on the West Bank to go ahead and Palestinian prisoners to be released. Mr Netanyahu can gain time by gradually doing what Mr Peres would have done. But it is doubtful that Mr Arafat can continue to imprison members of Hamas and Islamic Jihad if Israeli settlements are expanded. Neither Israel nor the US, having stridently demanded a 'clamp down' on Islamic militants, can complain too loudly over Mr Arafat's appalling human rights record. But ordinary Palestinians expect his policy of security co-operation with Israel to bring some improvement in their lives.

A problem with Oslo since Israelis and Palestinians first signed its basic outlines in 1993 is that the whole process is drawn out over eight years. This was an open invitation for those opposed to it to try to derail it by bomb and bullet. Both Israelis and Palestinians have tried to do so with a fair measure of success. Hamas and Islamic Jihad exploded their suicide bombs. Baruch Goldstein, an Israeli settler, killed 29 Palestinians in a mosque in Hebron. Yigal Amir shot Yitzhak Rabin, the Prime Minister, in the back in order stop the Israeli withdrawal from the land he believed God had given to the Jews. By implying, as he did this week, that he will stop all movement in the peace process if there is another bomb attack Mr Netanyahu is encouraging opponents of Oslo to resort to violence.

Is there any way it could be avoided? A lesson of the last half-century is that Palestinian nationalism is irrepressible - perhaps even as irrepressible as Zionism was. In 1982 Israel invaded Lebanon to eliminate the PLO, with disastrous results for itself. The Palestinian Intifada in 1987 showed that the occupation of the West Bank and Gaza could not be maintained without immense efforts by Israel. Even if Mr Netanyahu were to return Israeli troops to the cities and towns they evacuated last year he would have to fight a small war to take and hold them.

Nothing can really be achieved without granting a Palestinian state. If this were on offer it would be easier for Mr Arafat to sell concessions over Jerusalem and settlements to his followers. Everything that has happened in the Middle East over the last half-century shows the strength of Palestinian nationalism. Whatever Israeli hopes and Palestinian fears, this makes it impossible for Mr Arafat to preside over a Palestinian Bantustan. Even if Mr Netanyahu, like Mr Peres, goes hand-in-hand with Mr Arafat the conflict will continue until the Palestinians achieve self-determination.