The Western countries have dealt themselves a weak hand, yet they are going all in. Israel need only call their bluff.  The pot they hope to win is an agreement, misnamed as a peace agreement, which will establish a Palestinian state on the ’67 borders with Jerusalem as its capital. But there are no takers on either side of the ’67 lines.

To win this pot, the EU is threatening Israel with sanctions and with an amendment to the existing Free Trade Agreement. They are also threatening to reduce economic cooperation. They want Israel to stop building settlements in places that will make the two state solution untenable. So far they have accomplished nothing with the threats and I venture to say if they implement their plans, Israel will initiate moves of its own.

Israel could call their bluff by building in such places. Israel can take the heat. The EU is trying to apply sanctions only against products built in Judea and Samaria (West Bank).  This will hurt the Palestinians more than anyone and Israel has alternate markets for their products.

Israel could also up the ante by threating to prohibit European venture capital from making deals for Israeli innovations. China, India, Japan, Singapore and others are already lined up and anxious to take a seat at the table.  And Israeli trade with these countries is increasing exponentially and deals are being made. Israel’s trade with China has now exceeded her trade with the US.

Tony Blair, the EU’s economic envoy, recently visited Gaza for two hours and said. “You could lock Israeli-PA negotiators in room for eternity and peace would not come.” He laid out three preconditions to a “successful peace process.”

•  “dramatic and broad improvement” in the daily lives of Palestinians
•  “unified Palestinian politics” that “explicitly is in favor of peace and two states, meaning a sovereign State of Palestine and a secure, accepted State of Israel.”
• “an enhanced role for the region, in alliance with the international community, which must step up to share leadership of the issue.”

None of these things are about to happen.  That he is putting his money on these things, shows how bad a bet they are making. But he also laid the blame on Hamas and said they had to change.

Meanwhile the US is expressing concern that the PA may disappear soon due to its desperate need for money.

“It’s true we’re very concerned about the continued viability of the Palestinian Authority if they do not receive funds soon,” State Department spokeswoman Jen Psaki told reporters.

The present shortage of funds is due entirely to the decisions and policies of the Palestinians. First of all 30% of their budget is usually covered by the international community. Yet they have no interest in living within their means or decreasing their dependency on foreign aid. In fact, their actions have resulted in this aid being curtailed.  The US which provides about $400 million in yearly aid has now made the aid conditional on them not joining the International Criminal Court on April 1/15 as they intend. They were also penalized for joining UNESCO.

Because of the expressed intent of the PA to join the ICC, Israel has withheld $128 million now due them for taxes and customs collected by Israel for them. Europe has charged that Israel is breaking the Oslo Accords by doing so. From Israel’s point of view, she feels entitled to impound this money and to apply it in part payment of the $400 million due to the Israel Electric Corporation from the PA for the supply of electricity. The PA never pays this bill and demands the electricity for nothing, which they are not entitled to.

Their dire straits are due in large measure to their expenditures on salaries and pensions to terrorists, their embassies and consulates around the world, their propaganda war against Israel, their graft and corruption, their bloated government personnel and so on and so forth. The world refuses to hold them really accountable which it could if it wanted to, by simply demanding that these things change as a precondition to financing. So far the aid donors haven’t even threatened to do so.

Hamas did its part by starting the war last summer. The IMF reported last month that the war between Israel and Gaza drove the Arab economies of Gaza, Judea and Samaria into their first contraction since 2006.

Meanwhile the world has yet to make good on $5.4 billion promised at a Cairo conference in October to help rebuild Gaza. The main reason that the money has not been forthcoming is that Hamas stands in the way as Blair’s remarks above indicated. The money was supposed to be paid to the PA who were to be responsible for using it to rebuild Gaza and in part to cover part of their budget deficit.

At a recent conference, Israel’s FM Yaalon said “We tried to enable the Palestinian Authority to enter the Gaza Strip and they did not want to.”  Instead, “they ran away.” “They are good at blaming us in the UN Security Council and in the ICC, but when they need to take responsibly they are gone.”

The hand that the west has is lousy due in large part to the policies of Obama in the region. He has destabilized the region by his embrace of the Muslim Brotherhood and of the Mullahs in Iran. His efforts to bring Gadhafi down have resulted in a civil war in Libya, the proliferation of weapons available to Islamists, the murder of the American Ambassador and three other American personnel and finally in a threat to Egypt. His retreat from Iraq paved the way for the rise of ISIS and the increased influence of Iran in Yemen, Iraq, Syria and Lebanon.

He supported the removal of Mubarak so that Morsi and the Brotherhood could come to power in Egypt. Fortunately the Egyptian people rose up against Morsi and the Egyptian Army took over installing Gen el Sisi as the leader. Notwithstanding this coup, Obama continues to back the Brotherhood and in doing so has alienated Egypt who is now buying arms from Russia with Saudi money. Egypt in now fighting ISIS in Libya and the Sinai and Hamas in Sinai. It is a serious war.

His decision to lift much of the sanctions on Iran that were working, and instead to embrace Iran as a regional power, has made the likelihood of a good deal with Iran which prevents it from being a nuclear threshold state, all the more improbable.

These actions have resulted in a growing informal defense pact, between Egypt, Jordan and Saudi Arabia and Israel, all of whom find Obama’s choice of friends as an existential threat. They are meeting secretly, talking regularly by phone and coordinating their actions. A case in point is the united front that Egypt and Israel maintained in the Gaza war last summer, effectively freezing out Obama and Qatar. Currently, King Abdullah has declared war on ISIS and Israel has pledged to defend Jordan should it be necessary.

In addition, Israel is now faced with an imminent threat from Hezb’allah on Israel’s border with Syria.

Giving all that is happening around them, does anyone really believe that a deal will be agreed upon, especially a deal that requires Israel to return to the Auschwitz border (’67 Lines) and allow full sovereignty to the Palestinians.

I suspect that the West now understand that the cards they hold are lousy and that all the bets they made on them will be lost.

Ted Belman is the publisher of Israpundit