In recent months, the U.S.-Israeli relationship has been subjected to unprecedented scrutiny from all sides. Forty Democratic senators voted to block an arms sale to Israel in April because of the Israeli government’s actions in Gaza, Iran, and Lebanon, a vote that would have been unimaginable only a year earlier. Last December in Foreign Affairs, Andrew Miller made the case for a “normal” relationship between the two countries that ends the blank-check support the United States has provided to Israel over the years. In the wake of the Iran war, the chorus of critics has come to include members of U.S. President Donald’s Trump’s coalition, many of whom see Israel as responsible for dragging the country into an unnecessary and costly conflict.
Recalibrating the relationship between the United States and Israel is a necessary shift in American policy as Washington seeks to turn its focus away from the Middle East and toward other priorities. But recalibration alone is insufficient. If the United States hopes to avoid being drawn back into conflicts in the region, it must first pursue a more stable regional order. And as Hamas’s October 7, 2023, attack on Israel and its aftermath have made painfully clear, any strategy that ignores the Palestinian issue is doomed to fail. Not every problem in the Middle East stems from the Israeli-Palestinian conflict, but the region will never be truly stable until it is resolved. That will happen only if Palestinians are given the opportunity to govern themselves.
For the past 15 years, Washington has done little to advance that outcome. It has instead treated the Palestinian file as an adjunct to the U.S.-Israeli relationship—an issue revisited only during intermittent peace processes and one in which nearly every decision is subordinated to Israeli preferences. That must change. The Trump administration may seem an unlikely agent for this change. But President Donald Trump is nothing if not unpredictable, and with his administration’s relationship to Israel in flux, there may be room for maneuver. And even if such a change does not happen under Trump, his successors in the White House will need a plan to treat ending the conflict as a geopolitical imperative. If the United States wants a more peaceful and stable Middle East, it must prioritize its bilateral relationship with the Palestinians. Put simply, it must help Palestinians build a state of their own.
PROGRESSIVE ERA
The United States has pursued a nation-building strategy for the Palestinians in the recent past. The Palestinian Authority, the governing body established in the 1990s as part of the Oslo accords, made great strides from 2007 to 2011 under Prime Minister Salam Fayyad toward building institutions that could eventually support statehood. Fayyad improved the PA’s financial management and transparency, and with the help of a U.S.-led training program, professionalized its security forces. Combined with billions of dollars of aid from Washington and other international donors, these reforms delivered rapid economic growth, increasing GDP in the West Bank by an average of ten percent every year for the first four years of Fayyad’s tenure. In 2011, the World Bank concluded that Palestinian institutions were “well-positioned to establish a state at any point in the near future.” Public support followed performance: A majority of Palestinians approved of PA President Mahmoud Abbas and indicated they would vote for him; 58 percent supported the two-state framework; and over 60 percent backed diplomacy and nonviolence.
Analysts often attribute the PA’s successes during this time to Fayyad’s technocratic leadership. But Fayyad could not have succeeded if not for the favorable conditions that made his governing agenda possible. Chief among them was preexisting political legitimacy. Two years before he appointed Fayyad as prime minister, Abbas secured a broad mandate by winning 62 percent of the vote in the Palestinian presidential election. Abbas’s electoral mandate and the relative popularity of his Fatah party provided Fayyad with the political cover he needed to pursue ambitious fiscal transparency reforms and consolidate the PA’s security control across major cities in the West Bank. These reforms gave Palestinians reason to believe that their institutions could deliver meaningful gains toward statehood.
Fayyad’s PA also operated alongside an Israeli government that viewed strengthening Palestinian moderates as a strategic priority. Israeli Prime Minister Ehud Olmert engaged regularly with Abbas, facilitated the transfer of Palestinian tax revenues collected by Israel on the PA’s behalf, and eased restrictions on movement by Palestinians in the West Bank. This cooperation did not resolve core political disputes—Olmert and Abbas ultimately failed to reach a final-status agreement—but it enabled Palestinian institutions to function effectively and deliver for their constituents.
The promise of Palestinian domestic legitimacy, backed by supportive Israeli leadership, opened the door to international investment. In addition to the United States, the European Union and other donors committed billions of dollars to support Palestinian governance and economic development. Foreign assistance, combined with improved security conditions and rising private-sector confidence, fueled rapid growth. By 2010, the West Bank’s GDP had risen by 50 percent from 2000 levels. The result was a virtuous cycle: better governance generated public support, increasing the stability of Palestinian society and attracting foreign assistance, which in turn improved the PA’s ability to make good on its agenda.
The United States has pursued nation building for the Palestinians in the past.
But that progress began to unravel with the return to power of Israeli Prime Minister Benjamin Netanyahu in 2009. Netanyahu rolled back the Olmert government’s support for the PA and moved over time to systematically weaken it, expanding Jewish Israeli settlement in the West Bank, increasing Israel Defense Forces incursions into the PA-administered Area A, and periodically withholding tax revenues from the PA. Over the course of his tenure as prime minister, Netanyahu sought to divide Palestinian politics, marginalizing the moderates elevated by Olmert while empowering more extreme actors less willing to negotiate with Israel, including Hamas, which took control of Gaza from Fatah in 2007. As he destroyed the PA’s legitimacy in the eyes of the Palestinian public by expanding settlement construction, he allowed billions in cash to be flown from Qatar into Ben-Gurion Airport and transferred directly to Hamas in Gaza.
While Netanyahu moved to prop up more radical alternatives to the organization that Israel itself had helped establish through the Oslo process, the PA’s fiscal crisis deepened and its governance quality eroded. Abbas became increasingly weak, corrupt, and authoritarian, and support for his leadership plummeted. The core proposition of the PA—that cooperation and nonviolence could deliver results—lost credibility among Palestinians, while Hamas, with its doctrine of armed resistance, gained traction. Fayyad resigned in 2013 after Abbas subverted elements of his agenda. The United States and other international donors, disillusioned by the PA’s decline and the collapse of the peace process, scaled back their support.
Trump’s election in 2016 and the rightward shift of Israeli politics further accelerated the PA’s marginalization. His administration cut almost all U.S. assistance to the PA, moved the U.S. embassy to Jerusalem, shuttered the U.S. consulate, which had served as a de facto Palestinian embassy, and closed the Palestinians’ diplomatic mission in Washington. Netanyahu’s governments, meanwhile, expanded settlements and moved away from serious negotiation and toward annexation. With no hope for diplomatic progress, no prospects for political renewal or elections, and deteriorating conditions on the ground, the bottom dropped out of Palestinian support for the PA. A month before October 7, 2023, 78 percent of Palestinians polled in the West Bank and Gaza demanded Abbas’s resignation, and a majority supported armed resistance.
But disengaging with the PA and setting aside the Palestinian issue ultimately backfired for Washington and Israel. Nearly two decades of Hamas governance of Gaza culminated in the October 7 attacks and a devastating war. The United States has found itself mired in conflicts in the Middle East after attempting to reduce its presence in the region, Israel has found itself less secure and shunned by the rest of the world, and the international partners that supported the PA’s development have suffered the economic and political aftershocks of continued conflict.
THE BALLOT, NOT THE BULLET
Any serious U.S. effort to help the Palestinians build a state today should aim to reconstitute the conditions that made Palestinian statehood appear viable two decades ago. Washington should begin by backing a credible process to replace what has become a dysfunctional, aging Palestinian political leadership. Abbas, now 90 years old, recently announced that legislative elections will be held in November 2026, followed by presidential elections in early 2027, the first Palestinian national elections since 2006. The United States should hold him to that commitment and support the elections by demanding that Israel allow campaigning and access to polling sites across the Palestinian territories, including in East Jerusalem.
For years, U.S. policymakers have feared that elections could empower Hamas, which won the last Palestinian legislative elections in 2006 and remains committed to armed conflict. In 2021, the last time Abbas seriously considered elections, he received a lukewarm response from the Biden administration because of this worry. Washington’s equivocation was one of the reasons Abbas chose to postpone a vote indefinitely. But today, with Palestinian disillusionment at an all-time high, continuing to postpone elections would only erode the PA’s legitimacy further and strengthen Hamas’s claim to be the true representative of Palestinian nationalism.
U.S. policy should thus focus on shaping the conditions under which a legitimate, accountable, and capable leadership can emerge. Washington can, for example, encourage Abbas’s government to approve electoral laws that give alternatives to Fatah and Hamas a credible pathway to participation and influence. It can press for participation to be conditioned on a commitment to nonviolence, forcing Hamas to either moderate its position or not participate.
The United States should make clear that fair and democratic elections and a peaceful transition of power would result in the formal recognition of a Palestinian state. Such a move would not alter realities on the ground overnight, but it would be a tremendous boon to a new government, which could use U.S. recognition to win immediate public support.
Symbolic concessions would lend credibility to the PA. They must be backed by material promises. Washington should remove self-imposed legal constraints on its engagement with the Palestinians. U.S. laws such as the Taylor Force Act, which restricts the United States’ ability to provide any support to the PA until it has stopped financially compensating Palestinian prisoners who have committed violent acts against Israelis, have significantly curtailed Washington’s direct assistance to and diplomatic interaction with the PA. This law remains in force despite the progress the PA has made toward eliminating such payments. The United States should undertake an independent audit to verify the PA’s continued compliance, after which the restriction should be removed. Other U.S. legislation, including the Promoting Security and Justice for Victims of Terrorism Act of 2019 and the Anti-Terrorism Act of 1987, prevent the PA and the aligned Palestine Liberation Organization from establishing a diplomatic presence in the United States. A newly recognized Palestinian state should be allowed to open an embassy, conduct diplomatic business in Washington, and benefit from closer ties to Washington.
PARTNER IN PEACE
The United States will play an important role in any state-building project, but Palestinian self-determination will be impossible without the participation of the Israeli government. Netanyahu’s far-right coalition government, which includes extremist figures such as Finance Minister Bezalel Smotrich and National Security Minister Itamar Ben-Gvir, has done enormous damage to Palestinian society and to the viability of the Palestinian Authority itself. For over a year, the Israeli government has completely withheld tax revenues, which accounts for roughly two-thirds of the PA budget, from the authority. The resulting fiscal crisis has prevented the PA from paying government employees their full salaries, forced it into debt, and led to severe shortages of essential medicines.
If Netanyahu and his allies remain in power, Washington may find progress impossible. But the coming Israeli elections may present an opportunity to encourage a new approach. A future government that includes right-wing opposition figures such as Naftali Bennett is unlikely to embrace Palestinian statehood. But a coalition that also includes the centrist former Israel Defense Forces chief of staff Gadi Eisenkot and the center-left Yair Golan may prove more willing to take pragmatic steps to halt the PA’s decline, because they recognize the PA’s importance to the stability of the West Bank. These measures alone will not create a Palestinian state, but they could create the minimum conditions necessary for the United States, the Palestinians, and international partners to resume meaningful state-building efforts.
Even with a less intransigent Israeli government, the United States will need to use its leverage more assertively than it has in the past to shape Israeli behavior. At a minimum, it must demand the regular transfer of Palestinian tax revenues. If Israel continues to withhold these funds, the United States should temporarily suspend its free trade agreement and other cooperative economic programs with the country. If Israel insists on sabotaging the Palestinian economy, it does not deserve preferential economic treatment from Washington. More fundamentally, the United States should push for the renegotiation or replacement of the 1994 Paris Protocol, the Oslo-era framework that gives Israel the power to collect these revenues on behalf of the Palestinians. No government can build a state while another actor controls a key lever of its economy and actively works to undermine it.
Tax revenue is not the only Palestinian economic lever controlled by Israel. Since October 7, Israeli restrictions on movement within the West Bank have dramatically increased, disrupting supply chains, restricting access to agricultural land, and limiting Palestinians’ ability to find work outside their towns and villages. Control over internal movement is a fundamental component of sovereignty, and the Palestinian people will continue to view the PA as a failure as long as their daily lives are governed by Israeli checkpoints and roadblocks rather than by their own government. The United States should press for the rollback of these restrictions. If Israel refuses to relax them, Washington should suspend the program that allows Israelis the freedom to enter the United States without a visa.
Most corrosive to the credibility of the current Palestinian leadership is the PA’s impotence in the face of settlement expansion and settler violence. Since 2023, the Israeli government has approved over 50,000 settlement units and has largely ignored the more than 5,300 attacks by Israeli settlers. The Biden administration imposed sanctions on Israel’s most violent settlers and the organizations that support them. But after returning to office, Trump promptly revoked those sanctions. The rate of violent attacks today is 50 percent higher than it was when the Biden sanctions were in force. The United States must draw clear lines on settlement expansion and settler violence, starting with the passage of the West Bank Violence Prevention Act, which would reinstate the Biden-era sanctions program and could not be undone with an executive order.
FROM CEASE-FIRE TO STATEHOOD
The war in Gaza and the collateral damage of the wars in Iran and Lebanon have shown Middle Eastern and European governments that ignoring the Israeli-Palestinian conflict will only cause it to blow up in ways that are harmful to their interests and disrupt their domestic politics. They, too, must take a more active role in helping build a Palestinian state. Some international partners, most notably the EU and Saudi Arabia, have invested in the PA and pushed for reforms in transparency, fiscal management, and service delivery over the last two years. The United States should support these efforts by offering conditional financial assistance and technical expertise. But a stronger PA in the West Bank alone cannot produce a viable Palestinian state, much less durable regional stability. A successful state-building strategy must ultimately reunify Gaza and the West Bank under legitimate Palestinian governance.
Trump’s 20-point plan to end the war in Gaza, which Egypt, Qatar, and Turkey helped negotiate, offers a useful road map for a Palestinian state, including by explicitly naming governance of Gaza by a reformed PA as an end goal. But after its initial success in ending the war, the plan has stalled. Without progress on Hamas’s disarmament, an Israeli troop withdrawal, and the transfer of power to the PA or to the National Committee for the Administration of Gaza established as part of the cease-fire, it is likely to lead to a future in which Hamas controls a small portion of Gaza and Israel controls the rest indefinitely.
As it currently stands, the White House, the Board of Peace, and Israel are treating Hamas’s full disarmament as a precondition for international donations and the transfer of power to a technocratic Palestinian government. But the disarmament of Hamas can only proceed through a phased process of demobilization and reintegration that will likely take years. Continuing to insist on immediate disarmament keeps Hamas in power and gives Netanyahu an excuse to stay in Gaza. The United States should instead work with Egypt, Turkey, and Qatar to pressure Hamas to accept a plan for gradual disarmament, while extracting an Israeli commitment to a phased withdrawal directly tied to progress on that front.
To do this, Washington must first convince Israel to accept that the PA will have to play a viable governing role in Gaza. A sustainable postwar order will require a credible Palestinian alternative to Hamas, and the PA, despite its shortcomings, remains the only institution with the potential to serve as that alternative. The United States must make clear to Israel that obstructing this transition, as the Netanyahu government has by insisting that it will not budge until Hamas is fully disarmed, is incompatible with the broader objective of empowering a credible Palestinian alternative to Hamas. If Israel continues to insist that the PA play no role in the postwar governance of Gaza, Washington should restrict the use of American weapons in Gaza and the West Bank.
An empowered PA and a credible disarmament, demobilization, and reintegration process for Hamas will create the governing infrastructure needed for major regional and international investment in rebuilding Gaza; for the establishment of an International Stabilization Force as envisioned in the 20-point plan; and ultimately for a unified Palestinian polity across Gaza and the West Bank. The United States and its partners should not let Israel stand in the way.
GET THE BALL ROLLING
Together, these nation-building efforts could lay the groundwork for a regional peace process in which Israel engages with all its Arab neighbors, culminating in an eventual peace agreement, the creation of a Palestinian state, and Israel’s full integration into the Middle East. Such a future may seem far-fetched right now. The United States has only just agreed to end the war with Iran. Despite the emerging split in the U.S. Republican Party over Israel, Trump has shown no interest in advancing the cause of Palestinian statehood in either of his presidential terms. Israel is still controlled by an extremist right-wing government. Palestinians continue to live in horrific conditions in Gaza and face increasing violence and displacement in the West Bank.
But these conditions may soon change. Ahead of this fall’s elections, Netanyahu’s government is polling well short of the 61 Knesset seats required to form a coalition. Abbas has signaled that he may hold elections, and in PA Prime Minister Muhammad Mustafa, Palestinians have a capable technocrat who could play the Fayyad role under the right conditions. The Israeli-Palestinian conflict continues to play a central role in European and U.S. domestic politics. And the Republican Party may lose control of at least one, if not both, houses of Congress in November. Trump may find his domestic policy priorities frustrated, and like many presidents before him, seek a major foreign policy accomplishment to burnish his legacy. Taking the first steps toward a regional peace and the creation of a Palestinian state would be an impressive follow-up to the cease-fire in Gaza, one of the genuine successes of his second term. But even if Trump does not pursue it, Palestinian nation building could prove politically attractive for the next president, regardless of their party.
Nation building has been out of fashion in Washington since the United States’ failures in Iraq and Afghanistan. But in the case of the Palestinians, it still makes sense. In the absence of such efforts, right-wing Israeli governments stepped up efforts to foreclose the possibility of a Palestinian state, and a growing number of Palestinians became convinced that violent resistance alone could keep the dream of self-determination alive. These two trends continue to fuel the violence and instability that have plagued the region. If the United States wants to end this cycle once and for all and create the conditions for a lasting peace, it must advance the creation of a Palestinian state.
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