By Matt Spetalnick
WASHINGTON (Reuters) - When President Barack Obama brokered the relaunch of Israeli-Palestinian peace talks last September and set a one-year goal for reaching a deal, few thought he would succeed where so many others had failed.
But hardly anyone could have predicted that Obama would now be facing one of the sharpest blows to U.S. prestige in decades of Middle East diplomacy -- a Palestinian threat to defy him and push for statehood at the United Nations next week.
That unilateral move not only risks deeper paralysis in U.S.-led peacemaking efforts, but also puts Washington in a bind while it strives to restore credibility with the broader Arab world amid a wave of popular uprisings.
And it will be a stark reminder of the diplomatic costs the United States pays to shield its close ally Israel, which is finding itself more isolated than it has been in decades as it struggles to adapt to the region's political upheaval.
Rather than leading, the White House has appeared to be catching up to events, as with this week's last-ditch U.S. diplomatic mission to dissuade the Palestinians from going ahead with their plan to seek U.N. statehood recognition -- or at least to help contain the fallout if they do.
Seeking to defuse the situation, the European Union is pushing a fallback option that would offer some kind of lesser upgrade for the Palestinians at the United Nations and have the "Quartet" of Middle East negotiators lay out new guidelines for resuming peace talks, EU diplomats said on Thursday.
The stepped-up European role shows the Obama administration more willing to share Middle East diplomatic duties with Western allies, as it did militarily in the NATO-led bombing campaign that helped oust Libyan leader Muammar Gaddafi.
The Obama administration has also watched the rapid deterioration of Israel's ties with Egypt and Turkey, once its closest partners in a mostly hostile neighborhood, with growing alarm and remains at a loss over how to counter the trend.
Middle East experts, while not ruling out an 11th-hour compromise, warned it was probably too late to avoid a historic showdown when world leaders gather in New York for the opening of the United Nations General Assembly beginning on Tuesday.
"The administration raised expectations from Day One that peacemaking would be a high priority," said Haim Malka, an analyst at the Center for Strategic and International Studies think tank in Washington. "But it never really got off the ground, so now they're taking a big hit."
Palestinian President Mahmoud Abbas insists, despite fierce U.S. and Israeli opposition, that he has to take the case to the United Nations because 20 years of U.S.-sponsored peace efforts have hit a dead end.
With Washington vowing to veto a statehood resolution in the Security Council, the most the Palestinians can expect is a vote in the more-supportive General Assembly to upgrade their status from an observer "entity" to a "nonmember state" -- like the Vatican.
Israel fears that even that could open the way for the Palestinians to use international agencies to pressure it over West Bank settlements and East Jerusalem annexation.
Obama finds himself in a quandary of opposing a move toward Palestinian self-determination even though he has declared -- more forcefully, in fact, than any U.S. president before him -- that the Palestinians deserve a path to eventual statehood.
He insists that a two-state solution can only come through direct negotiations, but many critics say he has not done enough to restart long-stalled talks or provide other incentives for the Palestinians to drop their U.N. maneuver.
"American influence in the region has been reduced. This is one measure of it," said Elliott Abrams, a former aide to President George W. Bush now at the Council on Foreign Relations.
Many Arabs question Obama's even-handedness as peacebroker when he claims to champion the will of the people in Egypt, Libya and elsewhere but demands the Palestinians keep waiting.
Privately, an Obama aide acknowledged that a perceived U.S. "double standard" creates public relations problems.
Obama spokesman Jay Carney said the administration takes its Arab friends' concerns seriously but was "absolutely convinced that trying to achieve statehood through the U.N. is counterproductive."
SIDING WITH ISRAEL
Though Obama's relationship with Israeli Prime Minister Benjamin Netanyahu has often been strained, he cannot afford to risk alienating Israel's broad base of support in Congress and among American voters as he faces an unexpectedly daunting 2012 reelection bid that hinges mostly on the U.S. economy.
Republicans were quick to criticize Obama in May when he and Netanyahu clashed in an Oval Office meeting over the president's insistence that talks on Palestinian statehood should start on the basis of Israel's pre-war 1967 borders.
But Defense Secretary Robert Gates was reported, in one of his last national security meetings before retiring this summer, to have listed U.S. steps taken to guarantee Israel's security while stating bluntly that Netanyahu had given little in return to advance peace prospects.
Obama may seek concessions from the right-wing Israeli leader in return for holding the line at the United Nations, but probably not immediately. Analysts believe he will put off any major new peace drive until a possible second term.
"It's beyond the realm of the possible that the president will get it reactivated in the next 14 months," said Dan Kurtzer, a former U.S. ambassador to Israel who advised Obama during the 2008 campaign." He doesn't need another failure."
That's a starkly different attitude from when Obama took office in January 2009, making clear he hoped to make Middle East peacemaking a signature foreign policy achievement.
After an ensuing series of diplomatic stumbles, Obama called Netanyahu and Abbas together in Washington on September 2, 2010, to restart face-to-face talks and commit to trying to achieve a peace deal within a year -- a timeframe most analysts deemed unrealistic. Negotiations broke down quickly in a dispute over Israeli settlement building.
(Additional reporting by Susan Cornwell in Washington, Justyna Pawlak in Brussels, Mohammed Argoubi, Sylvia Westall in Tunis. Editing by Warren Strobel and Cynthia Osterman)