The situation facing Israel, the Palestinians and all other interested parties, especially the United States, is difficult, but it also presents important new opportunities. Negotiations between the Israelis and Palestinians may resume soon, although continued disagreements over Israeli settlement building may yet derail this.

If talks do resume, hopefully they will do so with measures in place to maximize the possibility of success. The recent Arab League decision supporting proximity talks facilitates the efforts of the US special envoy, George Mitchell, to bring the parties together. Regional cooperation and more constructive rhetoric by the parties will also help.

In the state and institution building program adopted last August, the Palestinian Authority has initiated an important innovation with regard to Middle East peace. Palestinians plan to build the institutional, infrastructural and economic foundations of their state while under occupation, in order to bring an end to the occupation.

All parties, including Israel, say it is their intention to realize the two-state solution. The Palestinians are therefore taking up the responsibilities of self-government as they continue to insist on the right of self-determination. In extemporaneous remarks at the Herzliya conference last month, Palestinian Prime Minister Salam Fayyad explained this, and the Israeli political and national security leadership in attendance applauded. He addressed accusations of unilateralism by noting that only Palestinians could build their own state.

It must be clearly understood that a Palestinian state can only be established through a negotiated agreement. The Israeli establishment that understands that a peace agreement with the Palestinians is a strategic imperative should recognize this program as a serious pathway to that end. And there should be no doubt about the negative strategic consequences of thwarting it.

Palestinian institution-building is not a substitute for diplomacy. Both support each other. The Palestinian Authority’s innovation is to add a bottom-up approach, based on palpable achievements, to top-down diplomacy. What is needed is convergence between the bottom-up and top-down approaches. Strategically significant, positive, changes on the ground and diplomatic progress should be mutually reinforcing.

However, the Palestinians will not be able to fully realize this ambitious and potentially transformative program on their own. It will require a sustained global effort to provide the Palestinian Authority with the financial and technical support and sustained political engagement that will be required for it to succeed. The Obama administration, the Middle East Quartet, Arab governments and the Israeli government all have a stake in establishing a Palestinian state. Now is the time for them to act.

At the heart of the state-building enterprise are the new Palestinian security forces. Their restoration of law and order, increased security cooperation, along with Israel’s removal of several checkpoints, has led to an economic upturn in the West Bank.

This model demonstrates what Palestinians can accomplish, and how Israeli concerns can be overcome, given appropriate levels of coordination, international aid, technical support and sustained political engagement. This process can be repeated in sector after sector. It is also vital that Palestinian security forces be allowed access and mobility. Israeli incursions undermine the legitimacy and effectiveness of these forces as state builders.

Despite the harsh realities of daily life under the occupation, conditions have improved in areas under Palestinian Authority control. But significant challenges remain. Tensions were raised by Israel’s decision to add holy sites in the Occupied Territories to its national heritage registry.

Continued settlement activity, confrontations in East Jerusalem, excavations near holy sites, evictions of Palestinian families, travel and visa restrictions, belligerent conduct by extremist settlers, and sporadic violence by individual and organized Palestinian extremists all undermine the viability and credibility of negotiators and negotiations. In this context, Prime Minister Benjamin Netanyahu’s intervention to defuse a crisis over building plans in Silwan has to be acknowledged.

The situation in Gaza is dire. Israel’s blockade has produced a humanitarian tragedy without weakening Hamas control. Isolation helps Hamas increase its hold on the long-suffering people of Gaza and to create a totalitarian theocracy that systematically takes over civil society and harasses international non-governmental organizations, the very organizations best placed to lead the reconstruction effort.

In short, the people suffer while Hamas benefits politically from this unconscionable blockade. Reconstruction should commence soon and the legal and orderly operation of the crossings be resumed. It is also vitally important to end the frankly mystifying and counterproductive pattern of Israel’s preventing Gaza students from traveling to study abroad.

The US Congress is to be commended for the substantial aid it provided to the Palestinians last year. This positive trend needs to be expanded by offering the necessary financial and political support for the Palestinian Authority to successfully pursue the state and institution building program. This is not simply a development project, it is a serious political program that advances a key American national interest.

This program should be funded by Congress, and that the United States government should lead others to fund and support it as well. George Mitchell is currently enlisting necessary partners to achieve coordinated political, economic and security progress.

The United States is the indispensable partner that can bring all parties to negotiations and agreement. This is a role that can neither be relinquished nor outsourced.

Ziad Asali is president of the American Task Force on Palestine. This commentary is adapted for THE DAILY STAR from testimony presented to a Senate Foreign Relations Committee hearing on March 4, and has been updated to take into consideration later developments.