The recent conflict between Israel and Hamas significantly recontextualised the request by the Palestine Liberation Organisation (PLO) for an upgrade from the United Nations General Assembly to "non-member observer state" status. How all parties react to the upgrade will have a significant effect on the balance of power within Palestinian society, and strongly influence future regional developments.
The PLO had left itself - and was offered by Israel and the United States - few options. With Hamas riding a wave of popularity, PLO leaders became even more determined to seek a UN upgrade. They calculate a largely symbolic diplomatic victory can offset Hamas's illusory victory on the battlefield.
Hamas has meanwhile achieved diplomatic breakthroughs of its own, with visits from the emir of Qatar, the prime minister of Egypt, the foreign ministers of Tunisia and Turkey, and more to come. Hamas is so flush with "victory" that it even reversed its position opposing the UN initiative, hoping to take some of the credit.
Now, more than ever, it makes no sense for Israel and the West to "punish the PLO" by making it harder for the Palestinian Authority to govern in the West Bank and handing Hamas yet another unearned and undeserved victory.
Hamas has undoubtedly gained, as it always does, a bump in popularity based on the euphoria produced by any conflict with Israel. In 2009, the bump deflated quickly because the PA was moving forward with Prime Minister Salam Fayyad's highly successful institution-building programme while the people of Gaza began to soberly assess the massive and lasting damage done by "Operation Cast Lead".
The PA requires at least $1 billion annually to augment its budget and cannot perform its most basic functions without such aid. The most fundamental is meeting the public employee payroll in both the West Bank and Gaza. A huge percentage of the Palestinian population is directly dependent on these salaries.
But following the 2011 UN bid, aid from the two biggest PA donors - the United States and the European Union - was reduced to about half of its previous levels. And for 2012, the American half of that half - $200 million - remains on congressional holds. And the Arab states that have encouraged the PLO in all their UN initiatives have failed to make up that shortfall.
This time, however, the PA cannot respond by pointing to gains created by its strategy of institution building. The cupboard is bare. And that creates the opportunity for Hamas to build much more sustained political gains among Palestinians everywhere, even though they yet again recklessly brought calamity, or near calamity, to the hapless people of Gaza.
The "breakthroughs" in easing the blockade Hamas says Israel agreed to, but which Israel denies - extending fishing access from three to six nautical miles off the coast, and easing passage through crossings and access to the "barrier area" - are minor and may never even materialise. They certainly don't change the fundamental situation for the people of Gaza.
It ought to be easy for the PA and the PLO to make the case for diplomacy and institution-building. However, the confrontations at the UN and elsewhere have left the PA with little to point to other than deferred salary payments.
It seems that all parties understood that the new situation called for restraint. There is nothing in the resolution that specifically precludes the PLO from seeking membership in various multilateral agencies. But PLO diplomats have reportedly assured the West that they will not move to join the Assembly of States Parties at the International Criminal Court, which could be a prelude for seeking charges against Israeli officials, or other sensitive multilateral bodies.
The PLO appears to have been successful in winning over several swing European Union states, including, France and Spain. This support should help reassure Israel. Israel must recognise that, unless it prefers dealing with Hamas militarily, it also has a huge stake in rescuing the PA from the political and financial doldrums.
Palestinian President Mahmoud Abbas ought to vigorously pursue his offer of resuming negotiations with Israel without preconditions, which means dropping the settlement-freeze demand. The West should reciprocate by restoring financial aid to the PA and other efforts aimed at improving the situation on the ground in the West Bank. And Israel should cooperate in those efforts and abandon the policy of punishing the PLO by degrading the ability of the PA to effectively govern in the West Bank.
Washington warned Israel not to "retaliate" against the Palestinians, for example by building in the hypersensitive E-1 corridor in the occupied West Bank or withholding Palestinian revenues. Israel is apparently prepared to heed such warnings and understands the political context in which any of its actions will be perceived.
All of Hamas's purported rivals and antagonists must work together to restore the formerly obvious contrast between the positive benefits of Ramallah's approaches with the dire consequences of Hamas's bellicose policies in Gaza.
Otherwise, they will be wittingly or unwittingly conspiring to move Hamas far closer to the realisation of its actual primary goal: uncontested dominance of the Palestinian national movement.
This is obviously not in the interests of the West or Israel. For the Palestinians it would be an unmitigated disaster. The conflict in Gaza, and its political aftermath, should serve as a clear wake-up call for everyone who does not want a Hamas-dominated Palestinian national agenda to act urgently and cooperate to prevent that from emerging.
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