Ask Mahmoud Abbas, the beleaguered Palestinian president, about the law of diminishing returns and he would probably explain it far better than an experienced economist!

And he should. The past year has seen his political fortunes dip in value faster than the world's ailing money markets. And yet he holds on, trying to reverse the trend and looking for ways to point his dilapidated leadership into a new horizon.

People who met him in Amman recently speak of his growing frustration and confusion. He is both weary and angry. In recent weeks he appears to have lost his sense of direction, but more importantly he feels alone, abandoned by allies and friends and left to fend for himself against a hostile and condescending Israeli government.

Abbas, a moderate leader and one of the early architects of a negotiated peace settlement between the Palestinians and Israel, is losing faith. Moreover, there is a sense of sinister inevitability hovering over his camp. There are those who speak of his ultimate "irrelevance", a reminder of the last few years of Yasser Arafat's career.

Not only he feels cheated by the Obama administration for backing down on earlier promises and commitments, but he now wonders if the US has the will to prevent Benjamin Netanyahu's right-wing coalition government from carrying out a full-fledged scheme to force a unilateral deal on the Palestinians which will effectively kill the two-state solution.

As he looks for ways to "climb down from the tree" of preconditions, which he had set forward as a prelude to returning to the negotiations table, he complains that his allies, Arabs and others, have taken away the ladder! He now wants an Arab cover for his own backing down, which he should get in the coming few days when foreign ministers meet in Cairo.

But succumbing to US and Israeli pressure is the least of his troubles. The so-called proximity talks, indirect negotiations aimed at bridging gaps, will leave him alone before a government that is busy building news settlements, expropriating lands, demolishing houses, challenging Muslim authority and rights over religious sites and refusing to discuss any of the final-status issues such as Jerusalem and final borders.

The timing for his concession could not be worse. Palestinian sentiments are at a boiling point, especially after Israel's recent decision to add the Ibrahimi Mosque in Hebron and Bilal Mosque in Nablus to its list of Jewish heritage, a move that even some Israeli officials feel has no purpose other than to inflame the Palestinians. Few days after Israel's announcement, soldiers stormed the area around Al-Aqsa Mosque in old Jerusalem and escorted settlers into the Noble Sanctuary, prompting Arab Jerusalemites to confront them.

Such tension, which Israel seems bent on escalating, is adding to President Abbas' woes. He is against a new intifada flaring up, but now wonders if Israel is trying to provoke one. Does Israel want to start a religious war, he asked recently.

Wherever he looks the scene is bleak. His Fatah movement is discredited after a spate of scandals and conspiracies. The PNA is trying to stave off accusations of corruption and embezzlements. Relations with Hamas are now at a new low, especially after the assassination of Mahmoud Al-Mabhouh in Dubai last January by Mossad agents, which UAE authorities have linked to Fatah officials. Meanwhile, Palestinian reconciliation efforts remain bogged down.

While Abbas waits for some assurances, in the form of answers to his queries to be delivered by US Middle East envoy George Mitchell, he can do little to improve his bargaining position. Palestinian security forces are under the control of Gen. Keith Dayton, US security coordinator for the Israel-Palestinian Authority. The PNA relies almost entirely on western and Arab aid that is regulated through the US. Arab allies will not suggest any course of action other than what has been approved by US Secretary of State Hillary Clinton in Washington.

In the midst of this confusion and frustration, a "scholarly" paper has been unveiled, written by chief Palestinian negotiator Saeb Erekat last December entitled "The Political Situation in Light of Developments with the US Administration and Israeli Government and Hamas's Continued Coup d'état." The 21-page document was sent to scholars and policy makers in Europe and it outlines several scenarios and options that could take place in light of the continued stagnation in the peace process.

These include disbanding the Palestinian forces and ending security cooperation with Israel, nullification of the Oslo Accords and even the dissolution of the PNA. In addition, it suggests abandoning the two-state solution and pursuing the path of creating of a binational state in historic Palestine. But how serious is President Abbas about adopting such options? And will he be allowed to implement any of them?

Few believe that Abbas, who had announced last year that he was not going to run for re-election, can muster the courage to undertake a radical decision such as dissolving the PNA. There are those, within Fatah, who are willing to replace him and take over if the opportunity presents itself. The PNA has become an institution of opportunists and mavericks, infiltrated by Israel and controlled by the Americans. It is, as one Israeli commentator wrote recently, the most ingenuous tool ever developed to legitimize occupation!

With Iran and its Arab allies now the focus of attention for the US, the West and Israel, the resumption of peace talks has become a side issue. Abbas' agonies, doubts and fears are of interest to no one. He finds himself entangled in a web of deceit and false promises. He also faces tough choices: To bow to pressure and embark on a process that may squander the last hope in a decades-old Palestinian struggle for independence, or become what he has failed to be so far, a historic leader of a nation under occupation. It is a choice between irrelevance and defiance; and in both cases his risks will be consequential!