This week a committee formed by Israeli Prime Minister Benjamin Netanyahu made recommendations that could have dire consequences for Israel. They could also end the Mideast peace process once and for all.

The so-called Levy committee put forth a justification for annexation of most of the West Bank and for permanent Israeli rule over millions of Palestinians who live there. Such a move would force Israel to choose between granting these Palestinians full Israeli citizenship or keeping them disenfranchised and confined to territorial cantons.

If Israel's government implements the Levy report, wrote Israeli international law professor David Kretzmer in the Israeli newspaper Haaretz, it "will have to acknowledge that apartheid is living and kicking" in Greater Israel, or else "it will have to extend political rights to all Palestinian residents of the West Bank."

The Levy committee, chaired by former Israeli Supreme Court Justice Edmond Levy, was set up by Netanyahu to try to find a way to "legalize" Jewish settlements established on the West Bank without formal government approval. Israeli courts have demanded that some of these outposts be dismantled, including many erected on private Palestinian land. Successive Israeli governments have pledged that they would do so. But nearly all the illegal outposts remain.

Senior Israeli government officials have tacitly aided the settlers in their illegal building efforts, and Netanyahu was eager to find a justification to avoid demolishing the outposts. So he stacked the Levy panel with staunch right-wingers who were strong supporters of the settlers.

The result: The Levy report rejects the very idea that Israel is "occupying" the West Bank. It proposes that Jews be permitted to settle almost anywhere in the West Bank, with minimal restrictions. And it insists that all Jewish settlements are legal, even those ruled illegal by four decades of Israeli Supreme Court rulings. "The Levy commission condones lawbreaking," says Princeton professor Daniel Kurtzer, a former U.S. ambassador to Israel.

The settlers don't care. But they, and the Netanyahu government, should be wary of getting what they wish for: If the Levy report's recommendations are adopted, the consequences could lead to the end of the Jewish state.

Why? Two reasons.

First, Israel can't afford to formally declare an end to occupation. True, Jerusalem has long rejected, in principle, the notion that it is occupying the West Bank, based on the claim that the territory's sovereignty was unclear when Israel captured it from Jordan in 1967. This, say the Israelis, exempts them from the Geneva Convention's obligations to the occupied population. (The Israeli claim is rejected by most other countries around the globe.)

Yet, since 1967, Israel has based its control of the West Bank on the Hague Convention, which gives the military of an occupying power the right to control a territory conquered during wartime - and to seize land for security use until the territory's status is resolved. Israel can't have it both ways: If it is not an occupier, then its military must withdraw and hand back all the West Bank land it has seized since 1967, including land that was passed on to settlements.

Netanyahu and his attorney general may choose to ignore that part of the Levy report. So let's suppose Israel continues its de facto acknowledgment that it is indeed an occupying power.

This brings us to the second danger posed by the Levy proposals: If Israeli settlement activity expands even more, in areas that have been prohibited until now, this will make it physically impossible to disentangle the West Bank from Israel proper. Already, according to an Israeli Interior Ministry census published at the start of the year, there are an estimated 722,000 Jews living in the West Bank and in Arab areas of Jerusalem occupied by Israel after the 1967 war. Jewish settlements, along with special settler roads, separate the Palestinian areas of the West Bank into disconnected cantons.

If pre-1967 Israel becomes permanently entwined with the West Bank, it will have to choose whether to give the Palestinians full citizenship and lose the Jewish majority within Greater Israel, or deny them rights and keep them confined to cantons. Down that road lies an apartheid state.

Indeed, the real intent of the Levy report may be to pave the way for annexation of much of the West Bank. According to Ori Nir, spokesman for Americans for Peace Now, which monitors settlement expansion in the West Bank: "The big thing on the Israeli right, which is gaining momentum, is to annex all of Area C [the 60 percent of the West Bank under full Israeli civil and military control]. That is the trend. The fact that the Levy committee walked toward that is important."

Given these troubled Mideast times, few would expect that Israel would accept the risk of a new Palestinian state in the short term. But unless the Jewish state keeps that prospect open - blocking new settlements and taking down those that are illegal - the two-state option will permanently vanish. Israel will find itself conjoined with West Bank Palestinians in a single, untenable state.