A harsh and pessimistic report by the Knesset Foreign Affairs and Defense Committee warns that faulty preparations by the government may result in Israel's standing being undermined when the Palestinians seek recognition as a state from the UN General Assembly later this month.

According to the report, commissioned by the committee chairman, MK Shaul Mofaz (Kadima), the government "did not prevent what could have been prevented, and afterward failed to prepare accordingly."

Over the past few months, the committee has heard briefings from senior government and defense officials on various aspects of what is expected to happen in September. Among those who appeared before the committee were the prime minister, the defense minister, the foreign minister, the Israel Defense Forces chief of staff, and the heads of the Shin Bet security service, Military Intelligence and the Mossad.

But the minute it became clear that the committee's report would slam the government's conduct, its publication turned into a loaded political issue.

Although two politicians did participate in writing the report - Shaul Mofaz and MK Yohanan Plesner, both of the opposition Kadima party - it is hard to dismiss the report's significance. Defense officials said the committee did a very thorough and serious job.

The author of the report, Dr. Barak Ben-Zur, previously held senior positions at both MI's research division and the Shin Bet. He now serves as a professional adviser to the committee.

As a result of pressure applied by people close to Prime Minister Benjamin Netanyahu, in the end, the report was signed only by the committee chairman, Mofaz, and not by the entire committee. At the same time, Mofaz decided not to release even an uncensored version of the report to the public. However, he did send copies to all the relevant government agencies.

In a short statement released on Wednesday, Mofaz said the report's "findings are a warning signal to Israeli policy makers" and called on the government to hold a thorough discussion of the report's ramifications.

Based on discussions with MKs and others who have read the report, its authors warned that a successful Palestinian bid for UN recognition as an independent state UN will produce "a long-term anti-Israel process" that will further Palestinian interests and restrict Israel's ability to maneuver.

The report argued that had Israel offered "a political option" that would have enabled the U.S. administration to draft an agreed formula for resuming Israeli-Palestinian negotiations, it might have been possible to neutralize the Palestinian move.

The report also criticized the failure to integrate the work of various relevant agencies, something that is the responsibility of the Prime Minister's Bureau and, especially, of the National Security Council.

On the other hand, the committee was favorably impressed by the preparations of the defense establishment, and especially the IDF, for the possibility of a confrontation in September.

The report concluded that what happens in September will create a risk of regional escalation and deterioration. Even though the current Palestinian leadership is not interested in another armed conflict like the second intifada, it said, the impact of the atmosphere generated by the "Arab Spring," combined with frustration among the Palestinian public at the gap between the UN's declaration and the reality on the ground, could result in an outbreak of frustration that could end in serious violence.

The senior IDF and Shin Bet officials who appeared before the committee warned that following the UN vote, a "dynamic of events" might develop, and under certain circumstances, this could result within mere days in nonviolent Palestinian demonstrations turning into violent confrontations with many casualties. Under such circumstances, the defense establishment believes the Palestinian security organizations might not be able to contain the violence.

The officials also noted that Iran and Hezbollah have a clear interest in a violent confrontation between Israel and the Palestinians.

Clashes in the West Bank could result in isolated settlements having to defend themselves against mass marches of Palestinians. This in turn could lead to acts of revenge against the Palestinians by extremist settlers.

Defense officials also warned that the confrontation could spill over into Sinai, where there has been growing activity by Hamas in conjunction with groups of extremist Bedouin.