The foreign and Israeli diplomats who attended the meeting of the Israeli Council on Foreign Relations on Sunday went home puzzled. In the morning they read in Haaretz that Prime Minister Ehud Olmert on his recent visit to Washington had rejected a proposal by U.S. Secretary of State Condoleezza Rice to reach an agreement on principles with Palestinian Authority Chairman Mahmoud Abbas (Abu Mazen). In the evening they heard Olmert's Deputy Prime Minister and Foreign Minister Tzipi Livni explain how important it is to present the Palestinians with a diplomatic horizon, very very soon. Today, not tomorrow, without ifs, buts and maybes.

The guests read in the paper that Rice's comments on the importance of a diplomatic horizon made no impression on Olmert. He stood by his opinion that before beginning to haggle over the goods, it is necessary to make sure that there is a Palestinian partner who can supply them. And now, a few hours before Olmert set out for the Sharm el-Sheikh summit, with the only good news in his small picnic hamper a fistful of defrosted dollars, the Israeli FM is explaining to those in Jerusalem that salvation will not come from releasing tax monies. She left no doubt in the hearts of her listeners that if it were up to her, she would bring entirely different baggage to the summit.

"Israel must clarify with the Palestinians the possibility of reaching agreements on all of the disputed issues," Livni said. To dispel all doubt, in reply to a question from the audience, Livni said that the problem with the Oslo agreement is not in that Israel went to far, but rather not far enough. "The mistake of Oslo is that we left the question of the Palestinian state, the borders and the refugees for the end. Our supreme aim is a Jewish and democratic state and not maximum Jewish settlement on the maximum amount of land. The only way to get there is through a two-state solution." Livni did not confine herself to local analysis, and spoke at length about the important role destined for peace between Israel and pragmatic elements in the territories in strengthening the moderate Arab circle in the region against the alliance of bullies.

Livni said that, as a lawyer, she prefers that the discussion with the other side take place on the basis of a proposal that she lays on the table first, and not the other way around.

As everyone knows, this is not the first time that Olmert and Livni have sounded like a prime minister and a leader of the opposition. The residues of the Second Lebanon War and the testimony before the Winograd Commission still hover between the two. The fresh lesson of the war does not allow the foreign minister to efface herself before the prime minister, when such an essential issue is at stake. But the fresh wound of her mini-revolt against him obliges her to behave with extra caution in the coming months. The final Winograd report, due to be published at the end of October, could open her way to the Prime Minister's Bureau. This time she has to ensure to not look back and discover she has been left alone.

The debate over dismantling the Palestinian unity government has been attracting more key individuals from the coalition in the direction of Abu Mazen. In negotiations with Fatah's leadership they are identifying an opportunity to postpone the premature breakup of their own government. Infrastructure Minister Benjamin (Fuad) Ben-Eliezer, a close associate of the Labor Party chairman, Defense Minister Ehud Barak, has openly urged Olmert to make hay before the next blow from Winograd. Fuad told him that only a new peace initiative, no matter with whom, Palestinians or Syrians, will save him and the government from Winograd's claws.

Even before Barak won the Labor chair, Fuad promised everyone: "Ehud is the next prime minister." He was not referring to Ehud Olmert. To this end he needs a few good months, until the public becomes accustomed to the official prefix "defense minister" before the name Ehud Barak. The rival Barak defeated, Labor MK Ami Ayalon told Haaretz over the weekend regardless of the conclusions of the Winograd Commission, the Olmert government chapter will end in December, 2007. In the meantime Ayalon is expecting that the government will present a diplomatic initiative based on the Arab League initiative and Ayalon-Nusseibeh accord. He proposes attacking only Hamas military targets and aiming for the entry of international forces into the Gaza Strip.

Ayalon supports reinforcing Abu Mazen, including by releasing prisoners, but he warns lest we turn him into a collaborator in the eyes of his people. He promises to advance the law to compensate Jewish settlers who are willing to be evacuated and is working toward a complete halt to investments east of the fence. The former head of the Shin Bet security service believes that in this way it will be possible to crumble Hamas and block the Iran's influence in the Gaza Strip. He says that before he decides whether to join the government, he will want to be convinced that it is heading in the direction of diplomatic activism and a change in the social and educational order of priorities along the line of that of Yitzhak Rabin. And the main thing, he says, is "to put education at the center." Education Minister Yuli Tamir, take note.

The prime minister marked the anniversary of soldier Gilad Shalit's fall into captivity with a solemn declaration: "Not a single day has gone by without our trying and investing supreme efforts in the attempt to bring him back home," said Olmert at the cabinet meeting. "I know what Noam and Aviva [Shalit's parents] and the members of the family are going through. We are continuing and shall continue to make every effort to free him."

These words, to put it mildly, are not entirely accurate. Too many days went by before Olmert requested that the Egyptians start negotiations with Hamas on a prisoner exchange. On June 26, the day after the abduction, the prime minister declared that "the question of releasing prisoners is not at all on the government's agenda." A week later the Foreign Ministry released a statement on behalf of the prime minister to the effect that "there isn't going to be any deal. Either Shalit will be freed or we will have to free him." Less than two weeks later, this policy - we will do anything to bring the boys back home, apart from negotiating a release of prisoners - embroiled Israel in a war in Lebanon.

"Making every effort" means breaking the boycott of Hamas and conducting direct negotiations, just as Tony Blair ordered, in the effort to release journalist Alan Johnston (not a soldier who had been sent by the government), and even crawling in front of the Iranians to rescue a group of sailors who had fallen captive. When Olmert finally accepted the principle that in exchange for Shalit's freedom he would have to release Palestinian prisoners, Shalit's captors raised the price. However, the blunders of the war in Lebanon and the Winograd Commission's interim report have reduced Olmert's public stock and along with it the price he is prepared to offer Hamas and Hezbollah.

In a statement the Foreign Ministry published on the anniversary of the abductions of Shalit, Eldad Regev and Ehud Goldwasser, it was said that "elements with influence, direct or indirect, on Syria and Iran are being asked to exert their influence on those countries. This is in the hope that Syria and Iran, who sponsor the terror organizations that are holding the abducted soldiers, influenced by increasing international pressure, will use their clout to bring the news that the families so expect and in the end to bring about the release of the abducted soldiers."

At the Foreign Ministry, as in the security establishment, they know that Khaled Meshal is unable at this time to convince the abductors to release Shalit. Among the things that Meshal said in a closed conversation a few days before the military coup in the Gaza Strip, there was no hint that the man planned to blow up the Mecca agreement, of which he was one of the groomsmen. Those in the security establishment confirm there are indeed signs Meshal and Ismail Haniyeh have lost control of their branches in the neighborhoods of Gaza and of the surrounding refugee camps. They are sending out distress signals and looking for any possible way to revive the unity government, which for them died a premature death. The Syrian and Iranian press are partners to the harsh criticism of the "brothers" in Gaza who are killing one another.

Shalit's release is possible in the foreseeable future only as part of a comprehensive agreement between Fatah and Hamas. This will be an inalienable part of the price the Islamic zealots will have to pay to repent and be accepted in meetings of the Palestinian government. At the moment the Fatah government and new Prime Minister Salam Fayad, who is known as a courteous and pleasant person, are showing no signs of forgiveness. From now on, the economic siege that Israel has imposed on Gaza is in coordination with the government of the West Bank, despite the call by United Nations envoy Michael Williams to lift it at once.

The Karni crossing point remains open only for bringing in humanitarian aid. Essential raw materials are not going in, and agricultural produce is not coming out. According to the spokesman for the UN Relief and Works Agency (UNRWA), the cessation of the supply of cement and other building materials will hurt plans to rehabilitate the homes of 16,000 refugee families that are living in very harsh conditions. Within a few days international elements will have to freeze infrastructure initiatives in the Gaza Strip to the extent of $60 million and along with the money 750,000 workdays of local breadwinners will go down the drain. Those in Fatah are building on the economic pressure, distancing the inhabitants of the Gaza Strip from the mosques and Hamas branches. It would be interesting to know where they learned this philosophy.