President Obama’s Middle East policy is in ruins. The U.S. continues to press Israel for a settlement freeze (and a freeze on Jerusalem), but Obama’s strategy has totally fallen apart. He turned the Israeli populace against him and strengthened the hand of Prime Minister Netanyahu (who he has no use for). At the same time has pressured political hacks such as Congressman Steve Israel to lend their names to the anti-Israel group known as J Street to give his administration some “cred” amongst the pro-Israel community.

The Arab League nations answered no to the President’s request for a peace gesture, and the President of the Palestinian Authority has used Obama’s settlement pressure  toward Israel as his “out” preventing the PA from reentering negotiations.  Settlement-building started way before Netanyahu, but it didn’t become a roadblock to negotiations until Obama was elected.

The entire settlement issue was caused by the Obama administration’s naïveté. What the President and his advisers perceived as a minor concession (a settlement freeze) was for Israel a grave sacrifice. This was a major error by the Obama administration. Their insistence on a freeze and their constant one-sided public berating of the Jewish State has turned the Israeli population against Obama, especially the Israeli left, whom Obama would look to for support.

Elliot Abrams was a deputy national security adviser in the George W. Bush administration, he feels that Obama needs to press the reset button on his Middle East Diplomacy.

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Peace in the Middle East has been on the Obama administration’s mind from the beginning. Two days after his inauguration the president traveled to the State Department to announce the appointment of George Mitchell as his Middle East peace negotiator. Secretary of State Hillary Clinton described the administration’s approach as “an intensive effort from day one.” Here was the plan: Israel would freeze construction in all the settlements and in Jerusalem; Arab states would reach out to Israel in tangible ways visible to their own publics and to Israelis; and the Palestinians would do better at building political institutions, ending incitement against Israel and fighting terror. With these achievements in hand the administration would lead the parties into peace negotiations to be concluded within the president’s first term. Nobel Prizes would be the frosting on the cake.

That’s not how it turned out, except for the Nobel Prize. As the Obama administration begins its second year in office, its Middle East peace efforts are widely regarded as a shambles. Its initial goals have all been missed. Israelis, Palestinians, and Arab governments have lost confidence in American leadership. The challenge for Year Two will be how to get out of this mess and on to a more positive track—but that will require some candor inside the administration in assessing what went wrong.

From the start the White House—led by the president himself and his chief of staff Rahm Emanuel—has pushed hardest for Israeli concessions, a reversal of the standard pattern where the legendary Arabists in the State Department’s Near Eastern Affairs bureau criticize Israel while top officials defend her. This time, those at the top—including Mitchell and Clinton—publicly and repeatedly demanded a total Israeli construction freeze. And this time, the experts in the Near Eastern Affairs bureau and in U.S. embassies throughout the Middle East were the voices of caution and realism, for whatever their biases they knew Obama’s approach wouldn’t work. The Arabs would not step forward. Israel’s coalition politics would not permit adoption of a total freeze. What’s more, once we demanded it as a precondition for new negotiations, Palestinians could demand no less. And unlike us, they would not be able to walk away from that demand when Israel predictably said no.

Obama’s narcissistic approach to the presidency, does not allow him to take advice from experts. It has happened over and over. But there is something additional driving it as well. President Obama has a lifetime’s worth of anti-Israel sentiments, which was a cause for great suspicion among Jewish voters during the early part of the campaign. Before the economy collapsed, the Jewish vote was moving away from Obama. In the end it was economics, not Israel, that was the key issue in the 2008 vote and with the help of Liberal Jews such as Abe Foxman, Ed Koch and Martin Peretz, Obama was able to overcome the suspicion.

The great plan has collapsed, but the mystery of who exactly will be in charge of the policy in Year Two—and whether they understand what happened—is now the center of conversations all over the region. Visitors are asked “What’s U.S. policy? Where is it headed? Is there a strategy?” In Israel, there is deep suspicion of the Obama administration, both at official levels and among the population at large. Prime Minister Benjamin Netanyahu’s decision to impose a partial settlement freeze should not have been a surprise despite the months of friction with Washington; for any Israeli government, relations with the United States are a central strategic matter, while a (partial) moratorium in West Bank construction is not. It is fair to say that Mahmoud Ahmadinejad is as much responsible for this freeze as Barack Obama, for in the coming year Israel may have to deal with the Iranian nuclear program—and therefore needs to avoid tension with Washington whenever possible. One official of a previous Israeli government put it this way to me: “Bibi agreed to this freeze to enable Israel to concentrate on Iran without the daily background noise about the settlements.”

Israel will always go far to keep relations with Washington on an even keel but that feeling is especially strong these days. The anti-Israel bias in the U.N.’s Goldstone Report—condemning Israel’s conduct during the Gaza war a year ago—astonished Israelis, but what hurt them more was the acceptance by the “international community” of Goldstone’s assault. His report, and the many recent efforts in Europe to have visiting Israeli officials arrested for “war crimes,” reminded Israelis how isolated they are in the world and how important American support remains. So the ten-month construction moratorium—to reduce tension with Obama, and to shift the blame for refusing new peace negotiations to the Palestinians—was approved 11-1 by Israel’s security cabinet.

You see but what Obama forgets is that the Palestinians do not want peace,its bad for buisness. It is the hatred of Israel that allows the PA to keep power. It deflects public anger from their own fraud and incompetence to the “evil Zionist entity”

But in Ramallah, Palestinian president Mahmoud Abbas—who heads the PLO and the Fatah party—now faces what one Palestinian observer described to me as “a double whammy.” First, the United States greeted Netanyahu’s compromise as a positive step and George Mitchell said it is “more than any Israeli government has done before and can help movement toward agreement between the parties,” but the Palestinians instantly and vehemently rejected it. So while American officials saw the Israeli move as the basis for commencing peace negotiations, the Palestinians did not—putting them at odds with Washington. “This conditional freeze does not give Abbas the ladder he needs to climb down and resume negotiations,” an associate of his said privately.

Don’t forget, it was President Obama who urged Abbas to “climb up” the ladere

Second, Israel continues to negotiate with Hamas via a German intermediary over the release of Gilad Shalit, the Israeli soldier captured in June 2006 and held since then in Gaza. The price will be Israel’s release of hundreds of Palestinian prisoners, and if the deal goes through many Palestinians will notice that Hamas, not the Palestinian Authority, has the ability to spring people from Israeli jails.

Both developments—on settlements and prisoners—weaken President Abbas, who today seems less powerful and less close to Washington. It did not help that he reacted to the growing pressures by announcing he was tired of the frustrations of governing, wants to leave office, and will not run for reelection. Abbas’s office in the “Muqata” in Ramallah—an old British police station, later Arafat’s headquarters and now the site of his glassed-in mausoleum—seems increasingly the burying place of his generation’s Palestinian politics as well.

So the Obama administration’s Middle East adventures in 2009 came to a close with Netanyahu, whom the administration has never much liked or treated well, stronger politically; and Abbas, whom the administration wished to strengthen, weaker and talking of retirement. In Arab capitals the failure of the United States to stop Iran’s nuclear program is understood as American weakness in the struggle for dominance in the Middle East, making additional cooperation from Arab leaders on Israeli-Palestinian issues even less likely. A strongly pro-American former Israeli official shook his head as he evaluated the Obama record in 2009: “This is what happens when -arrogance and clumsiness come together.”

But who will tell the president that his judgments have been wrong and his policy is failing? Does he recognize how much bad advice he was given last year? Who among the senior figures is likely to say to this president that George Mitchell is now associated with a policy disaster or that Rahm Emanuel’s read on Israeli politics proved 180 degrees off course? Presumably no one who wishes to continue to work in the White House after that.

What will Year Two bring? The evidence suggests that the administration, now in a hole, will keep digging: All our diplomatic activity remains dedicated to getting “peace negotiations” started. “We’re going to be even more committed this year, and we’re starting this new year with that level of commitment, and we’re going to follow through and hopefully we can see this as a positive year in this long process,” Secretary Clinton said in early January. George Mitchell, building on his dubious achievements of the past year, told Charlie Rose, “We think that the negotiation should last no more than two years. .  .  . Personally I think it can be done in a shorter period of time.” The media, here and in the Middle East, tell of “letters of guarantee” that President Obama may send Abbas and Netanyahu, promising the Palestinians an agreement on borders in nine months and a full peace treaty in two years if only they will sit down and negotiate.

Thus far the Palestinians are adamantly refusing to start negotiations and abandon their demand for a construction freeze including in Jerusalem, in exchange for such promises. But if they do, they will find the promised time limits to be illusory—as all previous ones have been. And no matter who sits at what table, there will be no serious negotiations: The Israelis and Palestinians are too far apart on the core issues to reach a deal now, and the Fatah and PLO leadership (having lost the last elections to Hamas and having lost Gaza to a Hamas coup) is too weak now to negotiate compromises and sell them to the Palestinian people. If there is any form of reconciliation between Fatah and Hamas, moreover, as Saudi Arabia and other Arab states continue to promote, Israel will end the talks instantly.

For two decades the “peace process” has failed to end the conflict and produce a Palestinian state. Unilateral Israeli withdrawal has also been tried, in Lebanon in 2000 and Gaza in 2005, but in both cases the vacuum was filled by terrorism: Hezbollah took over South Lebanon and Hamas conquered Gaza. Yet there is a way forward, the one sensible option never really tried: to start at the beginning rather than the end, by creating a Palestinian state from the bottom up, institution by institution, and ending with Israeli withdrawal and negotiation of a state only when Palestinian political life is truly able to sustain self-government, maintain law and order, and prevent terrorism against Israel.

This approach is very similar to what Netanyahu proposes.

This may seem like a formula for endless delay but it is in fact the fastest way forward, and it is beginning. In the West Bank, Palestinian security forces are doing more to bring law and order and fight terrorism. Economic growth continues, and foreign visitors are often surprised by the amount of construction in Ramallah and commerce in Jenin and Jericho; far from looking like Somalia or Yemen, the West Bank is increasingly prosperous. The Palestinian Authority prime minister, Salam Fayyad, describes his goal this way: “We have decided to be proactive, to expedite the end of the occupation by working very hard to build positive facts on the ground, consistent with having our state emerge as a fact that cannot be ignored. This is our agenda, and we want to pursue it doggedly.”

Fayyad’s push for Palestinians to build their own state themselves has angered Israeli critics who call it “unilateral,” and Fayyad’s rhetoric often offends them, but what good alternatives are there? To watch yet another round of negotiations end in another failure? The Obama administration gives lip service to Fayyad’s approach—no one is against building Palestinian institutions—but its own emphasis for Year Two remains entirely in the wrong places. U.S. diplomacy, like Arab and European diplomacy, is all about reviving Abbas and getting him into a room with Netanyahu—not about backing serious efforts to build a Palestinian state. Thus the only way to lay the foundation for successful peace talks is ignored, and what will predictably be unsuccessful peace talks are the obsessive goal of American foreign policy

The Obama administration rarely demonstrated the ability to shift gears and change policy in its first year. Even in the face of historic events such as the continuing demonstrations against Iran’s regime, it stuck devotedly to prior plans. Can there be a learning curve? Will someone tell the president the policy isn’t working and big changes are needed? Or can change come from the top down, if the president himself comes to realize what underlings are reluctant to tell him? Middle Eastern officials aren’t the only people who still can’t figure out the workings of the Obama White House; the mixture of campaign stalwarts, career bureaucrats, old Chicago friends, and outside advisers remains opaque. Obama White House personnel like to say the Situation Room has no windows precisely so that people can’t see in. In fact it has three windows that look out at the Executive Office Building, but the error is telling: They want to preserve the sense of mystery. The problem is, the main mystery in the Middle East is whether they’ll cling to a policy that has already failed or open their minds to one that has a chance of bringing serious progress.

Abrams’ suggestions are reasonable, but just like every other Issue, President Obama seems unable to change direction in a real way.