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Feelings of frustration and rage that grip the heart after a terror attack like yesterday's in Haifa's Maxim restaurant, push aside individual and public powers of reasoning. They lead to a demoralizing conclusion that Israel lacks a Palestinian partner for any resumed peace process, and so it has no choice other than to live by the sword.

Such feelings are also likely to lead to a vicious circle of reprisal and counter-reprisal, a cycle adding to the casualty toll and bringing the conflict to extreme levels from which there can be no return.

At the end of a cycle of sorrow and vengeance, both sides will find themselves faced with a necessity to coexist with one another, lest they be doomed to live endlessly in the hell which has taken hold for the past three years.

Israelis are divided as to whether the wave of terror which engulfs them expresses Palestinian opposition to conquest, or the Palestinians' refusal to come to terms with their opportunity to create their own state. In other words, is this violent Palestinian revolt aimed against the results of the 1948 war, or against the consequences of the 1967 war?

Israelis recall that before the current intifada erupted, Prime Minister Ehud Barak had proposed in their name to Yasser Arafat a generous peace agreement by which Israel would have conceded most or all of the land it conquered in 1967. Israelis know that the Palestinians were unable to accept this proposal, and that the Palestinians have a different account of the causes of the dispute and its history.

The lesson to be drawn from the last three years is that the two sides refuse to relinquish the original sources of the dispute - the Palestinians are unwilling to give Israel unconditional recognition of its right to exist; Israel refuses to abandon its conquest, and it continues to expand the settlements while it negotiates with the Palestinians about a peace settlement.

The violent conflict stems from these obstinate starting positions. As though to offset the grueling experience the Israeli public suffers after each terror attack, the Palestinians provide evidence about the grim results of preventive anti-terror actions and assassinations carried out by Israel. This balance of atrocities does not exempt Israel from its obligation to change the course on which it has deviated since the 1967 Six Day War.

Seen from the historical point of view, the occupation of the territories is a justifiable result of Arab aggression and attacks on the state of Israel. The 1948 Independence War and the 1967 Six Day War expressed the Arab peoples' refusal to recognize the Jewish people's right to establish a sovereign state on a small piece of territory in its historic homeland.

In retrospect, it appears that the use made by the state of Israel of its military success in 1967 has transmogrified, and become a threat to its own existence. Territories which Israel occupied and settled present a demographic threat, a security danger, an economic burden and a diplomatic problem. The effects of the occupation have maddened decision making processes undertaken by the leadership, scrambled public ethics in the country, and distorted values held by a number of constituencies in the state.

The occupation is a circumstance which must be brought to an end so as to preserve the state's moral fiber, and its capacity to survive. Should Israel's control in the territories persist, processes that cause the two sides to clash will intensify, and this fighting will eventually exhaust resources needed by both.

The recent decision reached by the government regarding the construction and placement of the separation fence reflects its hasty, imprudent thinking. What was once a legitimate defense measure that emerged as a result of murderous terror attacks like the one in Haifa yesterday, has become a lever for land-grabbing.

The government is wrong to believe that its sophistic explanations will dupe the world, and that the Palestinians will placidly accept the suffering caused by the places chosen for the fence to stand on.

The separation fence is designed to eliminate prospects for a viable Palestinian state. For this reason, settler leaders have accepted it with equanimity. Under the design endorsed by the government, the fence will create a South African reality whose result is easily predicted.