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Speaking at Bar-Ilan University last Sunday, Prime Minister Benjamin Netanyahu seemed to be targeting three distinct audiences with his messages. First was an audience of one - the president of the United States. The words "Palestinian state" were intended primarily for his ears. Next were Netanyahu's supporters in the United States, desperate for ammunition in the battle to depict their Israeli champion as reasonable, and to push the blame for any impasse back onto Arab and Palestinian shoulders. Third, and no less important, was the premier's domestic constituency. That his speech did not spark even the slightest coalition crisis reveals more about the stinginess of his words than it does about the sturdiness of his coalition.

So who was Netanyahu not talking to that night?

Certainly, the Arab and Palestinian publics, including 1.3 million of his own citizens, were not priority audiences. Yes, technically, the premier did turn to "all Arab leaders" and to "our Palestinian neighbors"; he is, of course, ready to meet them, any time, anywhere, and to cooperate on advancing an "economic peace." But Netanyahu was not engaging, or even reaching out. He was offering a history lesson.

By far the longest section of the Bar-Ilan speech was devoted to answering a question that Netanyahu himself posed: "What is the root of the conflict?" For him there is only one narrative: a narrow, unreconstructed and self-righteous nationalist discourse. It is designed to resonate well with the Israeli-Jewish public, and its exclusivity guarantees its inability to muster any legitimacy on the other side.

The emphasis Netanyahu placed on this narrative begs the question: Can it coexist with a two-state solution? Before one even begins to address that, two important caveats should be noted. The prime minister raised a host of practical issues (among them territory, settlements, Jerusalem, refugees and security), all of which he would have difficulty swallowing for a two-state solution to become reality, and that would probably happen only under a strong, U.S.-led external push. His narrative also precludes any true equality for the 20 percent of Israel's population that is Palestinian Arab. Irrespective of any two-state arrangement, Israel finally needs to square the circle of being both a democracy and a national home to the Jewish people. Indeed, the "Jewish state" framing has thus far fallen woefully short in practice.

If Netanyahu really believes that in order to make peace, the Arabs and Palestinians will need to become Zionists, then there will be no peace. If retaining this recalcitrant narrative is his way of delivering a rightist-led yet viable two-state reality, however, then things get interesting. As Likud leader and bearer of Ze'ev Jabotinsky's Revisionist legacy, Netanyahu should understand the inadmissibility of the former proposition. Jabotinsky understood that the Palestinian Arabs would never embrace Zionism - regardless of the economic peace and industrial parks on offer. One could even argue that the Abbas-Fatah leadership, in bucking this trend, was doomed to fail: It unconditionally accepted Israel, rejected resistance and assumed the mantle of peace partner, even while the Palestinians remained under occupation. Israel under Netanyahu is offering nothing to such a Palestinian partner, and perhaps it is more honest and even healthier that way. But can narratives be one thing and practicalities another?

Such an approach would have clear implications. It offers a cold peace of the kind that has worked and withstood the test of time with Egypt and Jordan. It should inform Palestinian strategy and drive the need for Palestinian national reconciliation. Most of all, it calls for a mature and dispassionate reading of those power dynamics by all the key protagonists.

I would agree with Palestinian academic Ahmad Khalidi, who suggested in The Guardian last month that "despite their current split, the majority of Palestinians - including Hamas - have accepted the political reality of Israel." Nonetheless, he went on to argue, it would be a mistake to think they will "acknowledge Israel's historic and moral claim to what were once Palestinian Arab lands." Hamas has not gone far enough in recognizing the limitations and counter-productive nature of indiscriminate violence. The Fatah-led Palestinian Authority has gone too far in limiting its toolbox exclusively to negotiations with Israel and in giving a nod to the idea of governance and security capacity being prerequisites to de-occupation. Neither Palestinian party has sufficiently appreciated the efficacy of nonviolent resistance to occupation.

Israel may have a longer journey to acknowledge the overreach constituted by continued occupation of the West Bank and East Jerusalem, and its thickening of the infrastructure of that occupation. Israel may be the world's highest defense spender relative to its population (according to the Stockholm International Peace Research Institute), but there are limits to what that spending can deliver (as witnessed recently in both Gaza and Lebanon).

The increasingly aggressive and egregious measures that Israel's occupation takes against the Palestinian civilian population are beginning to threaten, on an unprecedented scale, both Israel's democracy and its international support. And this is no longer a conversation just among ourselves. Truths are being belatedly spoken to all sides where it matters most - in Washington. Israel now has a friend in the White House who is willing to hold a mirror up to these hard realities of political power.

Daniel Levy is a senior fellow at the New America and Century Foundations.