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One of the most puzzling aspects of Israeli policy over the last five years is that neither the Sharon nor the Olmert governments have given the Saudi peace initiative any serious consideration. For most of its existence, Israel could only dream of an offer that explicitly includes peace, recognition of Israel's right to exist and normalization of its relationship with the Arab world. Why, then, has Prime Minister Ehud Olmert offered nothing but lip service to the Saudi initiative, and why did former prime minister Ariel Sharon never even indicate that he took it seriously at all?

There are good reasons to believe that the Saudi initiative, ratified by the Arab League, stems from solid and tangible interests on the Arab side. The Saudis and other regimes in the area are afraid that the Middle East could disintegrate into chaotic disarray if the tide of sectarianism and the surge of Islamist movements are not hemmed in. They believe that the Israeli-Palestinian conflict is one of the most powerful destabilizing factors in the area, and they have good reasons to think that it fuels Islamic extremism. The Arab world has come to a point where it is joining the international legitimizing of Israel provided by the 1947 UN resolution that endorsed the partition plan, because it no longer believes that it is in its interest to reject Israel's existence.

Why, then, does Israel not engage with the Saudi peace initiative? This initiative, like any Arab proposal that will ever come up, demands a "just solution of the refugee problem." The deep-seated fear in Israel is that the Arab insistence on a solution for the Palestinian refugee problem is ultimately a ploy to wipe Israel as a Jewish state off the map, not through military means, but through demographic means, by flooding Israel with millions of Palestinians.

But there are models for the resolution of the problem. In private conversations, influential Palestinians often say that for them, an acceptance of the Palestinian right of return is far more about Israel accepting moral responsibility for the Nakba (literally, "catastrophe," the Palestinian term for Israel's establishment and the subsequent refugee crisis) than it is about the physical return of Palestinians to their homes within the 1967 borders, and the Beilin-Abu Mazen agreement of 1995 has given semi-official expression to this view.

Here, I believe, resides the deepest reason for Israel's reluctance to actively engage with the Saudi initiative. Israeli public discourse and national consciousness have never come to terms with the idea, accepted by historians of all venues today, that Israel actively drove 750,000 Palestinians from their homes in 1947/8 and hence has at least partial responsibility for the Palestinian Nakba.

This has not happened to this very day because this idea is seen as undermining the foundation of the Zionist enterprise and the legitimacy of Israel's existence. It is as if we were locked into an insoluble dilemma: Either we deny responsibility for the Nakba, or we need to accept that we have no right to be here.

This is the source of the deep fear that prevents Israel from meeting the Arab world face to face and saying "we are here, and we believe that you accept our existence." Since Israel has not come to terms with its part in the historical responsibility for the Palestinian Nakba, it cannot truly believe that Arabs could accept our presence in the Middle East. We are locked into a vacillation between self-images of either all-good or all-bad, and hence continue the occupation of the territories, with all the horrors it includes, because the idea of Israel being guilty of anything is still equated with the denial of our right to be here.

The only way out of this deadlock is to raise the question of how Israel can live with its responsibility for the Nakba into public discourse. The dilemma of "either we are morally impeccable, or we have no right to be here" needs to be replaced with a narrative that accepts that Israel's moral, historical and political reality is as complex and multilayered as that of most nations.

In the best of all possible worlds, an Israeli statesman (a rare commodity in an age of mere politicians) would arise and tell the Palestinians: "Israel came into existence in tragic circumstances that inflicted great suffering and injustice on your people. We accept responsibility for our part in this tragedy, even though we cannot fully rectify it. Let us sit together and see how we can end the vicious cycle of violence and suffering and live side by side."

This is not likely to happen in the immediate future. A Jewish Israeli politician who would say such a thing would become unelectable. Hence it is up to the citizenry to bring this issue into the public consciousness. Otherwise, Israeli policies will continue to be devoid of any creativity and political horizon, and we will miss historic opportunities that may not return.

The author is a professor of psychology at Tel Aviv University.