Since the end of the World War II American foreign and defense policy has been based on stabilization and containment - mainly to halt the spread of Soviet influence. Even the Gulf War in 1991 sought only to reinstate the previous order.

The war on terrorism started by President George Bush is the first active initiative taken by an American government in pursuit of fundamental regional change. It began as a defensive reaction to the terror attacks of September 11, 2001, but its logic reaches farther than the wars in Afghanistan and Iraq.

The president has now won the glory of capturing Saddam Hussein, bolstering the credibility of his commitment not to cut off contact due to military pressure or get out of the Middle East and move in the direction of a new isolationism. But Bush now faces an enormous diplomatic challenge - to advance the settlement of the Israeli-Arab conflict, at the center of which is the Israeli-Palestinian conflict. The failure of previous efforts demonstrates that the address for this challenge is neither in Jerusalem or Ramallah, but in Cairo.

"Two states for two nations" is a nice but unsatisfactory slogan, because in all of Western Eretz Israel, from the Jordan to the Mediterranean, there is not enough room for the 10, 15 or 20 million Israelis and Palestinians who will be living here within a few years' time. One of the questions is where exactly the border between them will be drawn. Even if all the refugees return to a demilitarized Palestine, whose government uses its police to force the people to relinquish its dream of a continued holy war against Israel, the West Bank and Gaza Strip will be too overcrowded to contain the population explosion.

The obvious direction for expansion is seemingly to the east, to the Hashemite kingdom of Jordan. Three stations for three nations, or two and a half, because it is not quite clear how to relate to the non-Palestinian Jordanian minority that is identified with the Hashemite royal family. Jordan may well become a Palestinian state one day, but that will happen by means of elections rather than battles.

The declared American effort to bring democracy to the region threatens the kings in Amman and Riyadh no less than Bashar Assad and other unelected leaders. The chances of Jordan surviving as a monarchy are slim, but not necessarily in the near future, because American-Israeli policy will safeguard the Hashemites from falling - security first and democracy afterward.

The only natural expanse for the surplus Palestinian population is in northern Sinai, along the coastal plain south of Rafah until Lake Bardawil and the city of Al-Arish. A new and comfortable Gaza Strip can be duplicated along this strip of coast, comparable in quality to the French and Italian Riviera. The difficulty of course lies in Egyptian sovereignty over Sinai and the concept of the sanctity of land to its owners. The principle prevails here over any benefit.

Anwar Sadat refused to annex even a grain of Palestinian sand to Egypt, not even at the cost of dividing Rafah. Egypt is about one million square kilometers in size - to be precise, it is 1,450,000 square kilometers. The Egyptian coastline is 2,450 kilometers long. Little would be detracted if Palestinians are settled along a small part of it, from where they can give the Egyptian economy a shot in the arm.

The land would remain Egyptian and leased to Palestine or a regional organization for security and cooperation that would work to improve the lives of the 75 million people of Egypt living in desperate poverty, whose population is growing by leaps and bounds. The average life expectancy of Egypt, 70, is lower than that of Gaza by 1.5 years, and on the West Bank the life expectancy is 1.25 years longer than that of Gaza.

A course of action of this kind could win Bush and Hosni Mubarak a Nobel Peace Prize, if Mubarak were to devote the final years of his rule to this matter - demanding an Israeli concession on nuclear disarmament in return. Without it, the good will of even the most moderate of Israelis and Palestinians will not be enough.