Dear Friends,

The appointment of a new Prime Minister this month marks a major ideological shift in Israel's leadership, even if only temporarily, giving a positive boost to the Index despite a pessimistic Palestinian outlook. The PA is increasingly concerned that the peace process will be marginalized on President Biden's upcoming visit, with the focus on potential Israel-Saudi developments. Meanwhile, settlement expansion and violence continue as Israel attempts to erode Palestinian nationalism by targeting the flag.

The Two State Index jumped 2.1% in June (up 0.11 points from 5.52 to 5.63). 
Click on the headlines below for our analysis on developments this month impacted the feasibility of the two-state solution.

June at a Glance:

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Despite Public Support for Two-State Solution, Lapid Unlikely to Take Significant Steps Towards Peace as Interim PM

Yair Lapid became interim Prime Minister this month, following the collapse of Naftali Bennett’s unlikely and historic coalition of right-wing, left-wing, and Arab political parties. Lapid’s appointment gives Israel – after 13 years – a leader who publicly supports the two-state solution and the resumption of the Israeli-Palestinian peace process. Lapid’s pro-peace positions mark a significant ideological shift for Israel’s premiership, even if no significant steps are taken during the interim PM’s transitional tenure.

With Israel heading to its fifth elections in just three years on November 1, analysts say that Lapid may have a political interest in leaning leftward in an effort to draw support from an over-crowded center-left bloc. Lapid previously said that he would not advance the diplomatic process during his rotation as premier, but the collapse of his alliance with Bennett may see new prospects for Israeli-Palestinian engagement.

Palestinians, for their part, have indicated that while they favor Lapid over Bennett or Netanyahu, they are under "no illusions" that Lapid’s transitional government will reignite the stalled peace process given his short mandate, lack of legislative council, and a pre-election atmosphere which tends to see Israeli public discourse and opinion trend rightward.

Initial polls show none of the camps has a clear majority, and a close race is expected over the four-month election campaign as parties shuffle their decks and new players (including Former IDF Chief of Staff Gadi Eizenkot) consider throwing their hats into the ring.

Lapid’s appointment as interim prime minister leads to a significant rise in the TSI’s “Israeli Prime Minister” parameter, which jumps from 1 to 6. At the same time, the “Israeli Public Discourse” parameter falls from 7 to 5, with other issues dominating public consciousness and right-wing political rhetoric stoking nationalist sentiment in order to invigorate voters.

PA Fears Biden Visit Will Sideline Palestinian Issue, With Diplomatic Upgrade Consolation for US Consulate

Ahead of President Joe Biden’s visit to the region next month, the US upgraded its mission to the Palestinians renaming the "Palestinian Affairs Unit" (PAU) as the "U.S. Office of Palestinian Affairs" (OPA). The re-brand also came with an upgrade in diplomatic chain of command, with the new OPA dealing directly with the State Department in Washington as opposed to first going through the US Ambassador to Israel.

The move continues to fall short, however, of Palestinian demands for the US to re-open its consulate in Jerusalem. The gesture signals that the Biden administration may not be able to make good on its pledge, despite the State Department reiterating on multiple occasions this month that it remains committed to reopening the Consulate.

“The Palestinian leadership is not happy with the American approach to the peace process nor the bi-lateral relationship between the US and Palestine. The US has ranked the Palestinian issue very low on President Biden’s agenda during the visit, as evidenced by the Palestinians’ exclusion from any multi-lateral regional dialogue and the failure to re-open the consulate,” analyst Mohammed Daragmeh says.
Ahead of Biden’s July 13-16 visit, US Assistant Secretary of State for Near East Affairs Barbara Leaf and her deputy for Israeli-Palestinian Affairs Hady Amr shuttled between Israel and the PA, meeting with officials on both sides. Abbas told the US diplomats that he expected Israel and the US to present some kind of a political horizon for the Palestinians, and reiterated demands that Israel halt all unilateral actions.

The US indeed asked Israel to avoid actions that could stir tensions ahead of the visit – but the request likely had little connection to the Palestinians’ demands and more to do with concerns over violence and provocative actions or statements, in light of the diplomatic crisis ignited by Israel’s announcement of new settlements during Biden’s 2010 visit to the region as Vice President.

In addition to its implications for US-Israel, US-Palestinian, and Israeli-Palestinian relations, Lapid this month hinted that “small advances in relations” between Israel and Saudi Arabia could be expected during Biden’s visit, including the possible establishment of a regional defense alliance consisting of several Arab countries, Gulf emirates and Israel and limited bilateral gestures. Meanwhile, senior diplomats from Israel, Bahrain, the UAE, Egypt, Morocco, and the US held the first meeting of the Negev Summit Steering Committee this month, in another signal of advancing regional cooperation.
The Palestinian leadership is concerned that any steps taken to normalize ties between Israel and Saudi Arabia will marginalize the Palestinian issue in regional and international discourse and increase the Palestinians' isolation in the Arab world. In talks between President Abbas and Jordan's King Abdullah II this month, the Jordanian monarch assured Abbas that Jordan was "working to place the Palestinian issue at the top of Biden's agenda during his visit to the region", while Bahrain and Egypt jointly stressed the importance of returning to "serious and effective negotiations" to achieve the two-state solution. 

The TSI’s “International Actors – United States” parameter drops this month from 8 to 7, reflecting Palestinian concerns that Biden’s visit will sideline the Israeli-Palestinian issue while the US continues to fail to deliver on its commitment to re-opening the Consulate in Jerusalem. The “International Actors – Arab World” parameter also drops from 8 to 7, with the Arab world largely failing to demonstrate any meaningful interest or effort in promoting Israeli-Palestinian engagement though regional dialogues during Biden’s visit
EU Approval of $224 Million in Long-Delayed Funding Gives Boost to Palestinian Authority

The EU this month voted to release $224 million in funding to bolster the Palestinian Authority, after withholding the funds for months amid a dispute in Brussels over whether to condition the aid on alleged incitement in PA curriculums. While the results of the EU vote have not yet been made public, the PA said that the funds were ultimately released with no contingencies. The funding agreement was signed by PA Minister of Finance Shukri Bishara and EU Representative Sven Kuhn von Bergsdorff during an official ceremony at the presidential headquarters in Ramallah, in the presence of President Mahmoud Abbas, PM Mohammad Shtayyeh and ambassadors and representatives of several EU countries.

The decision to release the funding came as EU Commission President Ursula von der Leyen embarked on a three-day visit to the region. Italian PM Mario Draghi and German Vice Chancellor Robert Habeck also visited the region this month, holding meetings with senior Israeli and Palestinian officials, while French President Emmanuel Macron spoke by phone with President Abbas expressing his concern over a recent surge in violence and expressing his “availability” to help broker a “lasting peace” in the region.
Recent diplomatic engagement came as the UN Human Rights Commission of Inquiry (COI) into May 2021 violence blamed Israel’s “perpetual occupation” as the "underlying root cause" of recurrent tensions, instability and protracted conflict, and charged that Israel “has no intention of ending the occupation". Israel slammed the report as heavily biased and accused commission members of ignoring Palestinian violence, incitement and antisemitism.

The US also reiterated its opposition to the "open-ended and vaguely defined nature" of the COI, along with 22 other nations whose opposition to the report will be counted when it moves to the UNGA in September. On the heels of the report’s publication, the COI announced that it will also eventually investigate whether Israel committed acts of apartheid against Palestinians, as the PA, South Africa, and Namibia push to reconvene the UN Special Committee Against Apartheid to probe the issue.

These developments raise the TSI’s “International Decisions & Norms” parameter from 7 to 8 this month, as the international community inches closer towards greater accountability for Israel’s policies of occupation with potentially significant consequences for Israel. The EU decision to release financial support to bolster the EU also leads to a rise in the “Integrity of Palestinian Governance” parameter from 2 to 3, taken together with the US to re-upgrade diplomatic times at a particularly vulnerable time for the PA.

Abbas Succession Battle Heats Up As Fatah, Hamas Jockey for West Bank Political Support
PA President Mahmoud Abbas this month controversially announced the appointment of close aide Hussein al-Sheikh as secretary-general of the Executive Committee of the PLO, effectively placing him within reach of the presidency, as rumors of Abbas’ deteriorating health fueled debate over who should succeed the 87-year-old leader. Analysts suggested that media reports of Abbas’ deteriorating health were meant to sow discord within Fatah’s ranks over al-Sheikh’s un-democratic appointment.

“Some apparently wanted to remind the Palestinian people that their President is indeed aging, and that the process of replacing him is pressing. The succession battle reflects deep divisions on the Palestinian political front. From one side, the ruling Fatah party has not agreed on the next-in-line to lead the PA. And on the other side, Hamas preparing for succession in its own way,” says analyst Mohammed Daragmeh.
Hamas, which continues to build and strengthen a power base in the West Bank and East Jerusalem at Fatah’s expense, has warned that it will not recognize any newly-appointed PA or PLO leader that has not been elected through a general vote and would promote an alternative political leadership if elections are not held in the post-Abbas era. Hamas’s victory in student council elections at Birzeit University, and before that at Bethlehem University, have also stirred outrage within Fatah's ranks. The defeat signals a further erosion of Fatah’s political influence in the West Bank, especially among young Palestinians who are growing increasingly frustrated with stagnation in the peace process and skyrocketing inflation which have seen bread and oil prices rise by more than 30%.

Results of a poll released by the Palestinian Center or Policy and Survey Research (PSR) reflect a significant change in the domestic balance of power in favor of Hamas and its leadership. Public support for Fatah and Hamas is almost equal (at 35% and 36% respectively), with the gap between them narrowing to one percentage point from six points in March. The poll also showed that 73% of respondents are dissatisfied with Abbas’ performance, with a vast majority of the public (77%) calling for him to resign.

Despite these developments, the TSI’s “Fatah-Hamas relations”, “PLO cohesion” parameters hold steady at 3 this month.
Settlement Expansion Ahead of Biden Visit Presents Lapid’s First Major Political Challenge:
Israel announced this month that it would convene a Civil Administration subcommittee next month to hear final objections to the construction of 3,412 settlement units in E1. The controversial plan, which would ostensibly prevent Palestinian territorial contiguity from north to south, from Ramallah to Bethlehem, was first approved by former prime minister Benjamin Netanyahu’s government in 2012 and has since been repeatedly delayed as a result of intense international pressure. The planned July 18 hearing is the final opportunity to lodge objections to the plan the Higher Planning Council can approve the plan for validation.

The US asked Israel to postpone the E1 hearing, which is scheduled on the heels of President Biden’s visit to Israel, angering right-wing activists, politicians and settler leaders. Meanwhile, the West Bank settler movement "Nachala" said they had launched a campaign to identify sites for illegal outposts they plan to establish simultaneously next month in a direct challenge to interim PM Yair Lapid. Also this month, Israel announced plans to establish a massive 5,445 acre nature reserve in the West Bank, of which some 1,482 acres are on private Palestinian land.
Alongside settlement expansion, dozens of incidents of settler attacks against Palestinian civilians and property were recorded across the West Bank and East Jerusalem over the past month in addition to Israeli military raids in Jenin, Silwan, Bethlehem, Qalqilya, Hebron, and in East Jerusalem during clashes on Temple Mount/Haram al-Sharif during the Jewish holiday of Shavuot. Two Israeli settlers were arrested for alleged involvement in the fatal stabbing of a 27-year-old Palestinian man in the northern West Bank, in an incident that drew international condemnation.

The TSI’s “Settler Violence” reverse scale parameter increases from 7 to 7.5 this month. The TSI continues to monitor developments on E1 settlement planning, but no change is recorded to the Index’s “Settlement Planning” parameter.
Israel Targets Palestinian Nationalism with Bill Outlawing Displays of “Enemy State” Flags
Israel ramped up its attempts to damper Palestinian nationalism by targeting public displays of the Palestinian flag, promoting a bill that would make it illegal to fly Palestinian flags or the flags of "enemy states" at any state-funded institutions. The legislation was promoted amid fierce public debate over symbols of Palestinian national identity, which saw several high-profile attacks on the Palestinian flag last month.

Progressive left-wing movement Mehazkim, a member of the Geneva Initiative's Two-State Coalition,  protested the bill by hanging a massive Palestinian flag alongside the Israeli flag on a building in central Ramat Gan adjacent to a major highway, under the banner reading “we were meant to live together”. The campaign stirred major public outrage and the Palestinian flag was quickly taken down. Meanwhile, in the West Bank, armed Israeli settlers entered the Palestinian village of Nabi Saleh to take down Palestinian flags after a similar incident in Huwara last month.
The tumult over the flag is widely seen as erasure of Palestinian identity and narrative, and an attempt to restrain displays of affiliation and solidarity with the Palestinian national cause among the approximately 20% of Israeli citizens who are Palestinian. A survey published by the Israel Democracy Institute this month found that around 60% of Israeli Jews support segregation from Palestinians in Israel – a jump from 45% in April of last year.

The fracas over the flag leads to a drop in the TSI’s “Israeli public opinion” parameter from 6 to 5 this month
Other Developments:

  • Israel increased the number of work permits for Palestinians in Gaza to 14,000 after temporarily freezing the move in response to Hamas rocket fire. Israel responded by striking, but not destroying, a Hamas post using a helicopter gunship as opposed to a warplane. The decision reflects a cautious deterrence, which has sought to minimize prospects for further escalation and maintain progress on economic confidence building measures. Outgoing PM Bennett has said that under his premiership, the Israel-Gaza border has been the quietest year on record since Israel evacuated the coastal enclave in 2005. The TSI’s “Gaza - Humanitarian & Economic Conditions” rises from 5 to 5.5 this month.
  • Ben & Jerry's parent company Unilever struck a deal with the ice cream company's Israeli franchisee American Quality Products (AQP), allowing the brand to continue to be sold in Israeli settlements in the West Bank. The deal comes after a lengthly legal battle, during which multiple US states triggered laws against the Boycott, Divestment and Sanctions (BDS) movement. Israel hailed the deal as a major victory against the boycott movement, while Vermont-based Ben & Jerry's reiterated its position against settlements.
The Two-State Index (TSI) is brought to you by the Geneva Initiative, a Palestinian-Israeli organization working to promote a negotiated peace agreement in the spirit of the two-state vision. The TSI is produced by an Israeli-Palestinian team, and reflects a unique bilateral perspective.
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