The most important fact in the perpetual Israeli-Palestinian "peace process" is that Israel holds almost all the high cards. Fundamentally, the Palestinians want something life-changing that only Israel can give them -- a state -- whereas Israel can live well-enough with the status quo.
Palestinian negotiators can demand, protest, unify Fatah and Hamas or appeal to the international community but their strongest weapon remains the power of concessions, bowing to superior Israeli political and military force. Despite the BDS blockade and other pressures, Israel can live for years with no peace/no war but the Palestinians are stymied. Defiance in defeat may be a matter of honor but in itself it's not a strategy. And even the most determined resistance has its limits over time. Israel has nearly all the leverage.
The current situation after the newest collapse of negotiations becomes clear: Israel has several strategic options while Palestinians have only one, which is somehow to convince Israel that agreeing to a Palestinian state is in Israel's highest national interest. Israel could continue to insist on direct negotiations, either to leverage its dominance or with a secret policy of maintaining a "peace process" with no intention of making peace. This seemed to be Prime Minister Netanyahu's policy even though he committed a few years ago to a two-state solution. Or Israel can act unilaterally, ignoring the Palestinians in a strategy of "separation" from them without a peace agreement, settling boundaries, Palestinian right of return and the status of Jerusalem on their own. In the past week Netanyahu seems to have a new interest in unilateralism and separation.
Israel's best option isn't obvious and Netanyahu's room to maneuver is always limited by circumstances. In a parliamentary democracy, government policy is made by the prime minister and his ruling coalition. But parliamentary coalitions in Israel are traditionally unstable, consisting of several parties with often conflicting views, all the more so on bedrock issues. A prime minister whose majority is threatened can try to shift the composition of the governing coalition. Ariel Sharon did this successfully when he decided to evacuate Gaza in 2005, abandoning Greater Israel Likud to found a new centrist party, Kadima, with left-wing support for the disengagement.
Israeli public opinion is another factor, but far from decisive. Polls show a majority preferring a two-state solution, but they don't believe it's possible. Simultaneously they worry that a Palestinian state would somehow attack Israel with terrorism or rockets as happened after the withdrawal from Gaza, or even that some alliance with Iran or Hezbollah would create even greater danger.
The recent Fatah/Hamas agreement to form a unity government over the West Bank and Gaza increases the stakes. Hamas still refuses to say it accepts Israel's legitimacy and permanence, still denies the Holocaust ("a lie invented by the Zionists") and, although it's a government, is still named as a terrorist organization by the U.S. and the Europeans. The 'necessary partner' for a peace agreement has in Israeli eyes just become even less reliable than Fatah alone.
Nevertheless, there are a few new positive factors. At the same time as the unity pact was announced, Palestinian Authority president Mahmoud Abbas declared the Holocaust "the most heinous crime to have occurred against humanity in the modern era." (This was published not only in English but in the Arabic language Wafa, the official Palestinian news agency.) Abbas should have said this long ago, but better late than never. It complicates the Palestinian narrative of their own historical "catastrophe" (the Nakhba), their dispersion after the declaration of the State of Israel in 1948.
Abbas also said that Hamas would accept the three conditions demanded by Israel and the West: adhere to prior P.L.O. agreements, recognize Israel and renounce violence. This is one Palestinian trump card, although actions will speak louder than words.
Netanyahu's proposal for a Basic Law to officially declare Israel as "the nation-state of the Jewish people" is ambiguous. It is not the same as declaring Israel a "Jewish State." It would repeat the 1948 proclamation of "full equality in the personal and social rights of all its citizens, without distinction of race, creed or sex..." meaning non-Jews (including Christians and Druze as well as Muslims and Palestinian Christians) as well as Jews. In other words, Israel would unilaterally define itself. Palestinians wouldn't sign on to it because there would be no treaty. This has been the Palestinian position all along.
How would a unilateral Israeli strategy be implemented on the ground? The most radical proposal involves outright annexation -- taking the greater part of the West Bank, the sparsely populated two-thirds known as Area C. Palestinians are a minority here (about 150,000 to 350,000 Jews) and Israel has annexed before (Jordanian East Jerusalem in 1980 and the Syrian Golan Heights in 1981) but internationally the legality is universally rejected. One version of annexation would offer Israeli citizenship to Palestinians in Area C. Contrary to what seems obvious, many West Bank Palestinians, like many East Jerusalemites, might prefer Israeli citizenship because of higher living standards and other opportunities. The tiny remaining West Bank territories would be absorbed into Jordan, which would in effect become the Palestinian state. (Refugee descendants and native Palestinians are already a majority of Jordan's population with Hashemites the minority, even though they run the kingdom.) Gaza could ultimately be absorbed back into Egypt, which controlled it from 1948 to 1967, although most Gazans would probably resist.
The sole certainty is that the Palestinian situation continues to be disheartening. Direct peace talks, as Israel demands, have repeatedly failed. Open Israeli unilateralism looms again. The recent PA appeal for status in 15 international organizations (Palestinian unilateralism) will face Israel's ability to stonewall for years. Time passes and Palestinian youth face a future of frustration and futility.
Their leaders haven't found a way out of the box and Palestinians' fate as a people with a nation-state remains largely out of their hands.