The Israeli-Palestinian Conflict Is Not a Bankruptcy Sale

Following Israeli Prime Minister Benjamin Netanyahu’s surprise call for early elections in April, U.S. Ambassador to Israel David Friedman indicated that the release of the Trump administration’s much ballyhooed “deal of the century” would be postponed several months. After working on this peace plan for close to two years, President Trump’s team is probably disappointed by yet another delay, but Israel’s early elections may prove a blessing in disguise. U.S. negotiators have indicated that they have approached peace talks from a business perspective, but this fundamentally misunderstands the conflict and the Palestinian national movement. The proposal they have prepared not only stands no chance of being accepted by the Palestinians, but it would also set back the future prospects of an end-of-conflict settlement between Israel and the Palestinians for years to come. Every delay mercifully increases the likelihood that this disastrous plan never sees the light of day.

A “Bankruptcy-type Deal”

Trump’s peace plan will be a non-starter. This is clear even though the specific details of the proposal have been closely guarded. The administration’s very approach to conflict resolution between Israelis and Palestinians is fundamentally and irredeemably flawed. In what may be the most forthright description of President Trump’s strategy, Friedman, a core member of the president’s negotiating team, likened the White House plan to a “bankruptcy-type deal” for the Palestinians, suggesting the proposal will be the most favorable to Israeli interests since the two-state solution became the guiding, if implicit, basis for Israeli-Palestinian negotiations in the post-Oslo Accords 1990s. Trump himself has said a peace agreement is “like a real estate deal,” and his months-long refusal to endorse the two-state solution, which has been the official U.S. position on the conflict since 2002, is perhaps the clearest indication that Palestinian interests will get short shift in his plan.

Simply put, Trump’s negotiators believe the Palestinian enterprise has failed and its leadership will have to accept pennies on the dollar in any settlement with Israel. In their view, history has turned decisively against the Palestinians: Israel has continued to cement its control over the occupied territories, the Palestinian leadership has fractured, and Arab leaders increasingly prioritize the threat from Iran over Palestinian rights. Due to their weakened position, the Palestinians can no longer expect a deal to be as “generous” as the 2000 Clinton Parameters, which proposed a Palestinian capital in East Jerusalem and a sovereign and contiguous state, or even the 2008 Olmert peace offer, which proposed a full Israeli withdrawal from the Jordan Valley.

In this vein, the Trump administration’s various punitive measures against the Palestinians, including the closure of the Palestine Liberation Organization (PLO) mission in Washington and assistance cuts, are not just aimed at getting the Palestinians to return to the table after the United States recognized Jerusalem as the capital of Israel. They are also designed to persuade the Palestinians that their national project is, to borrow another business term, insolvent and will inevitably collapse if they do not accept a deal on Israel’s terms.

A Bad Analogy

This approach is unsurprising given the background of the president and his negotiators, all of whom come from the world of New York real estate. But a bankruptcy sale is a poor analogue for a national conflict, and international politics cannot be easily reduced to a commercial transaction. While the Trump administration can make life more difficult for Palestinian Authority President Mahmoud Abbas, U.S. pressure is highly unlikely to force the Palestinians to concede on their longstanding red lines for an end-of-conflict settlement. Three major differences between the worlds of business and foreign affairs help explain why this is the case.

First, “insolvency” in international relations is both rarer and less definitive than in the business world. Bankruptcy is commonplace in business, and there is an objective measure of insolvency that can be easily quantified: an inability to pay outstanding debts. Clever executives can try to mask a business’s true financial position, often by using illegal means, but sooner rather than later the bill comes due—literally and metaphorically. Once this happens, there is little debate about whether a business is bankrupt and all concerned parties recognize it is time to settle.

In contrast, full-fledged national movements like that of the Palestinians tend not to dissolve overnight. It is difficult to extinguish a national identity, which is as much an idea as an organization. The Palestinian national movement already has a long history of surviving what could have been mortal threats, including Israel’s decisive victory in the 1967 War, the PLO’s banishment to Tunisia in the 1980s, and the death of its leader of five decades, Yasser Arafat, in 2004. There is no clear way to gauge when a national identity is insolvent, but even if there were, it does not appear that Palestinians are prepared to declare their national project dead. A December poll of Palestinians found 74 percent of respondents would support rejecting a Trump administration proposal that most believe will deny Palestinian national rights.

Second, the concept of "limited liability," which makes commercial bankruptcy attractive to individual leaders, does not necessarily apply to national leaders. Bankruptcy is never a satisfying outcome for businessmen, but part of what makes it tolerable is that their personal assets are not put in jeopardy. A failed business, though embarrassing, does not always spell the ruin of its owners. The separation of business and personal assets means that the owner of a bankrupt business can sometimes walk away with a healthy bank account and all of their prized possessions, including homes and cars.

In the international arena, the stakes are much greater. A leader of a national movement who fails to meet the expectations of even a small portion of his or her constituents can pay the ultimate price. Both Egyptian President Anwar Sadat and Israeli Prime Minister Yitzhak Rabin were assassinated by their fellow countrymen because, in the eyes of their assassins, they compromised the national patrimony. For Abbas, succumbing to U.S. pressure and agreeing to make major concessions on Jerusalem or refugees would not simply be an acknowledgement of professional failure. It could also open the door to even more severe threats to his personal safety and that of his family. And, at the very least, Abbas would be remembered by Palestinians as a traitor who surrendered his people’s dignity and most deeply held aspirations.

Third, national movements, unlike private businessmen, neither get to start again after declaring bankruptcy nor are their assets inherently interchangeable. In the business world, there is nothing to prevent the owners of a bankrupt company from launching a new business, even in the same field in which they failed. And, while it is never easy to rebuild, one real estate empire can be replaced by another. The value of even the most prized building can always be replaced by another building, or a collection of buildings. Failure is not final in business.

The implications of bankruptcy for a national movement are starkly different. Once one has surrendered its national claims, there is no reset button for the nation or for national leaders. Because of the emotional dimension of national identity, national movements cannot be easily bought off with another “homeland” or compensated for a highly significant final-status issue with more of another final-status issue.

For the Palestinians, Gaza or the Sinai will never be an adequate substitute for Hebron or the Jordan Valley. Likewise, there is not enough investment money in the world to compensate Palestinians for a capital in Jerusalem, a city that is core to the identity of both Palestinians and Muslims the world over. When Trump says he has “taken Jerusalem off the table” but that Palestinians will “get something very good because it’s their turn next,” he fails to understand that in national conflicts some “properties” are priceless. The forfeiture of certain claims would be death for the Palestinian national movement, and neither the Palestinian people nor their leaders can easily forge a new identity somewhere else.

For all of these reasons, declaring the bankruptcy of their national movement is not a viable option for the Palestinians. The Trump administration’s proposal is destined to go over like a lead balloon in Ramallah. The stakes involved for a national movement are far greater than those for a commercial enterprise. Accordingly, there are no indications that Abbas will concede longstanding red lines on the core final-status issues of territory, Jerusalem, security, and refugees. And, as other experts have noted, his immediate successors are no more likely to do so. A Trump administration proposal premised on Palestinian bankruptcy is destined to fail.

To be fair, Trump will hardly be the first U.S. president to swing and miss on Israeli-Palestinian peace. The last three administrations all tried and failed to mediate a settlement between Israel and the Palestinians. But the Trump administration’s approach is nevertheless uniquely dangerous because it could discredit the very idea of U.S. mediation in the Arab-Israeli conflict, which has been a sine qua non for prior progress. Trust, once lost, is very difficult to rebuild. There is a real danger that the Palestinians will conclude that the Trump era is not an aberration in U.S. policy toward the conflict, but rather the revelation of America’s true motives. U.S. negotiators for subsequent administrations may also experience more difficulty proposing and pressing Israel to accept less generous terms after President Trump offered the Israelis so much.

It is clear that President Trump’s proposal will not be the “deal of the century.” But if it disqualifies the United States from playing a future role in promoting Israeli-Palestinian peace it could prove to be one of the follies of the century. Trump and his negotiating team have shelved their ill-conceived “peace” plan while awaiting Israeli elections. It should stay shelved for good.