This article by Moshe Ya'alon should be required reading by anyone who seeks to 'solve the problem of the Middle East'.
There are four main misconceptions that diplomats bring with them to Israel. Primary among them is the idea that solving the Israeli-Palestinian conflict is a prerequisite for stability in the Mideast. The truth is that the region is riven by clashes that have nothing to do with Israel. For instance, the Jewish state plays no role in the conflict between Shiites and Sunnis, between Persians and Arabs or between Arab nationalists and Arab Islamists.
The second misconception is that Israeli territorial concessions are the key to progress. The reality is that an ascendant jihadist Islam believes that it is leading the battle against Israel and the rest of the West. Given this dynamic, Israeli territorial or other concessions simply fill the jihadists' sails, reinforcing their belief that Israel and the West are weak and can be militarily defeated.
Emissaries also still believe that "the Occupation" blocks agreement between Israelis and Palestinians...
Instead, the heart of the problem is that many Palestinians -- Fatah and Hamas, in particular -- and even some Israeli Arabs use "Occupation" to refer to all Israel. They do not recognize the Jewish people's right to an independent state, a right affirmed again and again in the international arena.
Finally, the well-intentioned visiting diplomats believe that the Palestinians want -- and have the ability -- to establish a state that will live in peace alongside Israel...A corollary of this fourth misconception is the belief that economic development can neutralize extreme nationalism and religious fanaticism, thus clearing the way toward peace and security...Those who fit this description should demand that the Palestinians explain what they did with the $7 billion in international aid they received over the years. Seven billion reasons for economic progress -- and yet, why did Palestinian mobs destroy the Erez industrial zone, where Palestinians worked and ran businesses for decades, on the Gaza border? Why do they attack safe roads linking Gaza and the West Bank? Why is the Palestinian economy in shambles?
And to add a far more general and nebulous concept, one that affects the whole Middle East and of which the Palestinian Territories are but a prime example: the failure of a culture, one that sees itself as pre-eminent, but in fact contributes virtually nothing to the rest of the world. That is shameful and shaming, and there's not much we can do about it.