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If Mahmoud al-Mabhouh were sitting in an Israeli prison instead of posthumously starring in the international media, his name would be on the list of prisoners whom Hamas is demanding in exchange for Gilad Shalit. He would almost certainly be one of the "arch-terrorists" that Israel, for its own security, is insisting be barred from the Palestinian territories after their release, a condition that Hamas has refused to accept. On top of this snag, the American government is strenuously opposed to the exchange, on the grounds that a Hamas success in securing the release of hundreds of prisoners would bolster the organization's prestige and highlight the impotence of the Fatah-led Palestinian Authority.

Yet both these arguments are utterly specious, and merely lay bare the obtuseness and shortsightedness prevalent in both Jerusalem and Washington. The wantonly negligent handling of the plight of a young soldier languishing in captivity is characteristic of the policy, or lack thereof, regarding Israel's fate as a Jewish and democratic state.

The Mabhouh case has knocked the bottom out of the argument that Israel will be safer if the worst of the freed terrorists are exiled to Damascus as part of a deal for Shalit. The huge effort put into assassinating Mabhouh in Dubai and the diplomatic and security risks - surely calculated ones - taken by whoever did it are indications of the man's standing in the world of terrorism. Exile, it transpires, can be an ideal hothouse for breeding arch-terrorists.

Prime Minister Benjamin Netanyahu, who gave the okay for the botched attempt to kill Khaled Meshal in Amman in 1997, must have realized by now that it is best to keep the most dangerous and sophisticated prisoners Israel releases close to hand. That way, it is easier to keep track of them. If a brother of Mabhouh, upon returning home after a prison sojourn, were to revert to his evil ways, no Israeli ambassador would be called in to explain the day after he was eliminated.

Netanyahu is aware that Hamas has rejected deportation from the outset. There is no chance that further bargaining will shift it from this position. The only explanation for Israel's insistence on reinforcing the ranks of Meshal's gang in Damascus with vengeance-hungry exiles is that the prime minister does not want to pay the price of the deal.

The price tag of the bigger deal with the Palestinians has also been known for a long time. It was set out in the Clinton parameters of 2000, the Arab peace initiative of 2002, the road map of 2003 and the Annapolis statement of 2007. All of these propose a comprehensive peace in exchange for a withdrawal to the 1967 borders, with minor, reciprocal border adjustments and an agreed solution to the refugee problem. In fact, the tariff has remained the same since the PLO's 1988 declaration of an independent Palestinian state.

Netanyahu also avers that he has accepted the principle of two states for two peoples. But after accepting it, he immediately rushed to set impossible conditions: He demanded that the Palestinians recognize Israel as a Jewish state and declared that East Jerusalem, the Ariel bloc and the Jordan Valley would be annexed to Israel. Having heard what his defense minister claims to have offered Yasser Arafat, and being aware of the map that his predecessor laid before Mahmoud Abbas, it is hard to believe that the prime minister thinks he can find a Palestinian partner for what he has in mind.

America's dogged resistance to a reconciliation between Fatah and Hamas shows that President Barack Obama fears for the future of the Palestinian peace camp. But instead of moving the peace process forward with that same doggedness, the United States has been attacking the Shalit deal. That is far easier than pressuring Israel to transfer more of Area C to Abbas, remove more roadblocks and make sure that the freeze on settlement construction is not a hoax.

Assassinating exiled terrorists will not defeat Hamas, and thwarting a prisoner exchange will not have a long-term impact on the balance of power in the Palestinian territories. The right way to tackle Hamas is to create a real political alternative to its violent and uncompromising course. In the absence of such an alternative, operations taken from James Bond movies that the foreign media attribute to Israel make this country look like a neighborhood thug and divert attention from the specter of apartheid crouching at the gate.