The Palestinians' beef with Israel isn't territorial—it's existential.

From The Wall Street Journal, 15 March 2010, by BRET STEPHENS:

The Settlements Aren't the Problem
...as last week's diplomatic eruption over the prospective construction of 1,600 housing units in municipal Jerusalem shows, the settlements are a constant irritant to the United States, one friend Israel can't afford to lose.

The Palestinians' beef with Israel isn't territorial—it's existential.
So it would be a splendid thing for Israel to tear down its settlements, put the settlers behind its pre-1967 borders and finally reach the peace deal with the Palestinians that has been so elusive for so long.

Except for one problem: The Israeli-Palestinian conflict isn't territorial. It's existential.
Israelis are now broadly prepared to live with a Palestinian state along their borders. Palestinians are not yet willing to live with a Jewish state along theirs.

That should help explain why it is that in the past decade, two Israeli prime ministers—Ehud Barak in 2000 and Ehud Olmert in 2008—have put forward comprehensive peace offers to the Palestinians, and have twice been rebuffed. In both cases, the offers included the division of Jerusalem; in the latter case, it also included international jurisdiction over Jerusalem's holy places and concessions on the subject of Palestinian refugees. Current Prime Minister Benjamin Netanyahu has also offered direct peace talks. The Palestinians have countered by withdrawing to "proximity talks" mediated by the U.S.

It also helps explain other aspects of Palestinian behavior. For Hamas, Tel Aviv is no less a "settlement" than the most makeshift Jewish outpost on the West Bank. The supposedly moderate Fatah party has joined that bandwagon, too: Last year, Mohammed Dahlan, one of Fatah's key leaders, said the party was "not bound" by the 1993 Oslo Accords through which the PLO recognized Israel.

Then there is the test case of Gaza. When Israel withdrew all of its settlements from the Strip in 2005, it was supposed to be an opportunity for Palestinians to demonstrate what they would do with a state if they got one. Instead, they quickly turned it into an Iranian-backed Hamas enclave that for nearly three years launched nonstop rocket and mortar barrages against Israeli civilians. Israel was ultimately able to contain that violence, but only at the price of a military campaign that was vehemently denounced by the very people who had urged Israel to withdraw in the first place.

... the sad fact is that the most important thing Israel's withdrawal from Gaza accomplished was to expose the fanatical irredentism that still lies at the heart of the Palestinian movement.

The withdrawal exposed other things too. For years, Israel's soi-disant friends, particularly in Europe, had piously insisted that they supported Israel's right to self-defense against attacks on Israel proper. But none of them lifted a finger to object to the rocket attacks from Gaza, while they were outspoken in denouncing Israel's "disproportionate" use of retaliatory force.

Similarly, Israel withdrew from Gaza with assurances from the Bush administration that the U.S. would not insist on a return to the 1967 borders in brokering any future deal with the Palestinians. But Hillary Clinton reneged on that commitment last year, and now the administration is going out of its way to provoke a diplomatic crisis with Israel over a construction project that...is plainly in keeping with past U.S. undertakings.

In the past decade, Israelis have learned that neither Palestinians nor Europeans can be taken at their word. That's a lesson they may soon begin to draw about the U.S. as well. Which is a pity for many reasons—not least because it gives the settler movement every excuse it needs to keep rolling right along.