In the middle of a stalled peace process, one of the few things Israeli and Palestinian officials agree on is that U.S. President Barack Obama deserves much of the blame for the impasse. Israeli policymakers are furious with the demand that Obama made early in his term that Israel freeze settlement construction in the West Bank and with his declaration in May that Israel's 1967 borders should serve as the starting point for peace discussions. Palestinian leaders, for their part, believe that Obama has failed to fulfill the promise he made in his June 2009 Cairo speech to back their legitimate aspirations for statehood, and they are irritated that he has not forced the Israelis to continue the settlement freeze. The recent decisions by Palestinian President Mahmoud Abbas to strike a unity deal with Hamas and press for UN recognition of Palestinian statehood is a sign of how frustrated with Washington he has become.

In the face of this impasse, a variety of international figures are now asking Europe to step in. Arab leaders such as former Arab League Secretary-General Amr Moussa have called on Europe to take charge of the peace process. In a May meeting with EU officials, for example, King Abdullah of Jordan urged Europe "to intensify efforts with a view to removing the obstacles that impede the resumption of the peace process."

The EU's current political and diplomatic leaders need no encouragement. They already seem to feel that they have both a right and a duty to help solve the conflict. Last year, then French Foreign Minister Bernard Kouchner and Miguel Ángel Moratinos, his Spanish counterpart, said in a joint statement that the EU "must play a role because it is a friend of Israel and of the Palestinian Authority [PA] and above all because its own long-term security is at stake."

There is just one problem: neither the EU nor any of its member states are up to the task. Europe will always play second fiddle to the United States in the Middle East -- regardless of how effective or ineffective the U.S. president happens to be. Rather than attempt to influence the peace process, a futile practice that will only compound the stalemate, Europe should focus on doing what it does best: fully leveraging its role as the lead donor and key partner to the PA in its state-building process. In doing so, the EU will be in a far better position to promote economic development in the Palestinian territories and foster peace between the Israelis and the Palestinians.


There is a broad consensus in Europe that Israeli-Palestinian peace based on a two-state solution is not only vital for the Middle East but, in the words of the former EU foreign policy chief Javier Solana, "fundamental to [Europe's] own security." European leaders believe that the ongoing strife threatens their economic interests in the Middle East, where the EU is the top external trading partner and a major energy purchaser. They also worry that the conflict is alienating and radicalizing Europe's increasingly assertive Muslims. In recent talks with Israeli Prime Minister Benjamin Netanyahu, German Chancellor Angela Merkel underscored the importance of Middle East peace to both Germany and Europe, arguing that ending the stalemate was "more urgent than ever."

Given these views, it is hardly surprising that the European External Action Service, the EU's new de facto foreign ministry, has made finding a solution to the Israeli-Palestinian conflict a "strategic priority." Its head, Catherine Ashton, has frequently emphasized Israeli-Palestinian peace as a key component of regional stability. Various individual EU members, including Germany, the United Kingdom, and, most recently, France, have each proposed their own plans to relaunch the stalled peace process.

European involvement in Israeli-Palestinian negotiations is nothing new. Since the Oslo peace process began in 1993, the EU has served as the PA's lead international donor, consistently providing 50–55 percent of its total funding. Together, the European Commission and EU member states contribute about $1.5 billion to the PA every year. Recently, the EU has focused on backing Palestinian Prime Minister Salam Fayyad's efforts to build and strengthen Palestinian institutions, which is supposed to help pave the way for Palestinian statehood. In 2010, it provided over $430 million for Fayyad's plans, compared with the United States' $200 million and Japan's $100 million. Meanwhile, the EU and Israel have developed a strong trade relationship; the EU is Israel's number one trading partner, with total bilateral trade in 2009 nearing $30 billion.

Despite its substantial financial investment in both Israel and the Palestinian territories, the EU has proved unable to exert any real political power over the peace process. This disconnect between the role the EU craves and the one it actually plays haunts European leaders.

Europe's lack of sway in the Middle East is partly a result of the fact that the EU's 27 member states agree on only one thing: the need for the Israeli-Palestinian conflict to end. Beyond that, national interests, local jealousies, and domestic political considerations have prevented the EU from establishing the kind of common policy that would let it have a hand in the peace process. EU member states have, for example, blocked France's attempts to organize peace negotiations, hoping to stymie that country's desire to remain Europe's leading power in the Middle East. Meanwhile, Europe's Muslim communities are increasingly driving domestic debates and national policies on Israeli-Palestinian issues, forcing local politicians to take their pro-Palestinian views into account.

But the EU's biggest problem is that it has failed to convince both Israel and the Palestinians that it could be a better mediator and sponsor than the United States. From Israel's perspective, Brussels has nothing to offer that compares with what Washington can provide. Successive Israeli governments have viewed the United States as their international protector and thus the only viable intermediary with the Arabs. Israelis see that the United States is often the only country that stands up for them. In February, for example, the Obama administration vetoed a UN Security Council resolution that condemned Israeli settlement building. And more recently, Washington declared its opposition to the PA's efforts to gain UN recognition in September. Both stands came despite ongoing tensions between Obama and Netanyahu.

It is not lost on Israeli leaders that Europe rarely takes such stands. Indeed, Israelis have distrusted Europe since French President Charles de Gaulle abandoned his alliance with Israel in favor of alignment with Arab states on the eve of the 1967 Six-Day War. Israelis also remain wary of Europe due to rising anti-Semitism across the continent and a perceived insensitivity to Israel's security challenges. Not even Europe's status as Israel's leading trading partner or Israel's aspirations to join the EU have managed to mitigate such suspicions.

Europe's sway also remains limited among Palestinian leaders. Even as PA officials appreciate the EU's rhetorical support for Palestinian rights, they recognize that Europe is unable to pressure or persuade Israel to make concessions. Palestinian policymakers may worry about declining U.S. influence with an intransigent Netanyahu or the Obama administration's lack of a peace strategy. But they recognize that Jerusalem's economic, strategic, and diplomatic reliance on Washington makes the United States the only external party capable of pushing Israel to compromise. That is why, in the last years of Bill Clinton's presidency, the veteran Palestinian politician Nabil Shaath described the U.S.-Israeli relationship, combined with the U.S.-Palestinian relationship, as "best for the peace process." It is also why the Palestinian ambassador to the UN, Riyad Mansour, declared last April that "bold leadership" by the United States would "seriously contribute to a revival of the political process."


What should EU leaders do if they cannot carve out a meaningful political role in the peace process but truly believe that it is, as British Foreign Secretary William Hague recently put it, "too important to be allowed to fail or falter"?

To begin with, they should give up their obsession with trying to compete with the United States. EU policymakers need not measure their international standing in terms of how much leverage they have in the peace process or how much attention Israeli and Palestinian leaders pay to them. Europe is denting only its own self-confidence when it tries, and fails, to match the United States' role in the Middle East.

The EU should also make room for non-European powers to get involved. European leaders have jealously guarded what little role they have in the peace process. By relentlessly promoting the EU as the only legitimate external party besides the United States, they have blocked attempts by other countries, such as Brazil and Qatar, to enter the field and mediate between Fatah and Hamas or back the PA at the UN. Instead of waging turf wars, the EU should act as a role model for rising powers and welcome their financial and political investment in the peace process. It can share its own history of economic development with these countries, working with them to apply those lessons to developing the Palestinian territories.

European policymakers must also stop denigrating the EU's role as financier of Middle East peace negotiations. French President Nicolas Sarkozy recently complained that Europe cannot be the main party "paying for Palestine and yet remain a minor figure politically in the matter," implying that Europe's financial assistance to the Palestinians and its trade ties with Israel are simply a pretext for gaining political influence. Such sentiments underplay the EU's real achievements. It is largely thanks to the EU's financial support for the PA that the UN, the International Monetary Fund, and the World Bank all have recently declared that Palestinian institutions have become competent enough to run an independent, functioning state. If the Palestinians gain UN recognition in September, Europe will share the credit.

Still, Europe can do better. All too often, EU money has flowed into Fatah-dominated institutions that lack any accountability, engendering corruption and alienating EU taxpayers. In addition, the PA spends much of its EU funding on salaries and operating costs, as well as on strengthening Fatah-controlled security forces under the guise of reform. Although such support strengthens anti-Hamas forces, it has created a bloated security apparatus and comes at the expense of more long-term capital projects that could create jobs and develop infrastructure.

The EU needs to demonstrate greater vision and ambition in its financing efforts, namely, by turning its attention to developing Palestinian science and technology. Projects like these would help the PA become competitive in a vital sector of the global economy. Yet so far, the EU has devoted only a tiny fraction of its aid to the Palestinian high-tech sector. The EU does currently fund the Palestine Academy for Science and Technology, which coordinates scientific and technological development programs in the Palestinian territories, and specific projects under the European Commission's ESPRIT initiative, which is intended to develop expertise in high-performance computing and networking. But European leaders should build on this existing support by investing in venture capital funds and start-up incubators that can foster some of the hundreds of high-tech companies and thousands of technology graduates based in the Palestinian territories.

Similarly, EU officials should invite more Palestinians to participate in the EU's science, research, and technology "frameworks," programs that support researchers from around the world. Israel enjoys the deepest involvement in these frameworks of any non-EU state, allowing its scientists and engineers to work with the best of their European counterparts. To encourage a more extensive Palestinian role in such cutting-edge research and development, the EU should draw on its experience in exchanging knowledge with Israeli academics. And it should support existing projects that bring together Israeli and Palestinian technology entrepreneurs. It could back Startup Weekend Tel-Aviv, where innovators meet to discuss and market their ideas, and support joint Israeli-Palestinian initiatives, such as when the European Investment Bank recently funded a West Bank venture capital firm founded by Israeli and Palestinian high-tech entrepreneurs. In doing so, the EU could bring the lessons of Israel's phenomenal high-tech success to Gaza and the West Bank.


Only by ramping up and making better use of its aid for Palestinian state building can the EU realize its full potential in the Middle East peace process. Doing so will not be easy. For one thing, the European fiscal crisis has made aid money harder to come by. For another, Europe's obsession with playing a leading role in the peace process has distracted it from its more useful functions in the region.

The EU has a chance to play a more productive role in a conflict to which it is bound by geography, history, culture, and trade. By focusing on state building rather than negotiations, Europe would remove a major source of tension between the EU and the United States and reduce infighting inside the EU itself. Most important, this would allow the EU to redefine its relationship with Israel and the Palestinians. Europe can build on its outstanding economic relationship with Israel by healing mistrust and strengthening diplomatic ties. And it can enhance its support for the PA by funding projects that will have a lasting impact on a future Palestinian state.

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