Jerusalem no longer is the city it was in 2000, when Israelis and Palestinians first negotiated its fate. In the interval, much has changed, complicating the task of unscrambling the Jerusalem egg based on the formula presented by President Clinton in December of that year: what is Jewish would be Israeli; what is Arab would be Palestinian; and a special regime would govern sites holy to the three monotheistic religions. It has become commonplace in some quarters to decree that partitioning is now unfeasible given the pace and shape of settlement construction. Feasibility is an inexact science and, in theory at least, willing mapmakers and determined policymakers still could implement the same principle, if not draw precisely the same line, as twelve years ago.

Yet, two things are incontrovertible. First, expansion of Jewish settlements or neighbourhoods in East Jerusalem raises the political price of partition and thus lowers its likelihood. The upshot is that the international community, and notably the U.S., will have to pressure Israel to limit further alteration to Jerusalem’s physical landscape; this challenge is particularly acute today in light of recent settlement announcements that many see as potentially fatal to any two-state solution. The second, less tangible but equally consequential reality is that changes in Israel and the region have intensified religious and historical claims to the city. Whenever negotiations resume, each side will need to acknowledge the other’s ties to Jerusalem and its religious sites, and both sides will have to be open to creative solutions in tune with this new, emerging climate.

Since Clinton offered his parameters, the Jewish population of East Jerusalem has grown significantly in each of the three belts – an outer belt that defines Greater Jerusalem, a middle belt that surrounds the city centre, and an inner belt that runs through the city’s core – that structure Israeli settlement in and around the city. The good news is that, so far, much of the increase has been in previously built-up areas. The bad news is that settlement construction over the past 45 years has been so extensive as to make even minor developments in strategic locations highly detrimen­tal to prospects of one day dividing the city. This report, the first of two issued simultaneously, examines this evolution. Part II, Extreme Makeover? (II): The Withering Away of East Jerusalem, looks at the emaciation of Palestinian political life in the city.

There are several critical territorial flashpoints. Particularly significant are two horizontal bands – one each in central and southern Jerusalem – that would extend a Jewish continuum from west to east across the entire municipality and beyond. Planning for residential units in the central band (dubbed “E-1”) and in the southern band (including a new settlement, the first in Jerusalem since Har Homa in 1997, known as Givat HaMatos) – both of which have been on hold for several years owing to international pressure – has now resumed. E-1 is widely perceived as particularly damaging, because it would all but disconnect East Jerusalem from a Palestinian state and sever its urban expanse. In southern Jerusalem, new Israeli construction threatens to completely envelope some Arab neighbourhoods. These are only two of the disquieting settlement projects that the Israeli government has pushed forward following the 29 November 2012 UN General Assembly resolution declaring Palestine a non-member observer state. Whether international pressure will stop these developments, and for how long, is yet unclear.

Of all developments in the city, potentially the most explosive lie within the inner core, where Jewish settlement within dense Palestinian neighbourhoods has accelerated. A ring of national parks, which open lands to Israeli usage and limits it for Palestinians, is being built around the city’s historic core. Within these parks, Israel has licensed archaeological and educational projects; the largest, the City of David in the Palestinian neighbourhood of Silwan, has become one of Israel’s most successful tourist attractions, with over 400,000 visitors a year. At the centre of contestation stands the Holy Esplanade – Har HaBayit (The Temple Mount) to Jews and al-Haram al-Sharif (The Noble Sanctuary) to Muslims – which has an outsized effect on the conflict. Potent political-cum-theological developments in Israel over the past fifteen years have prompted demands for Jewish worship on the plateau, a potentially explosive issue that will constrain the kinds of political solutions Israel someday might pursue.

A parallel evolution has taken place on the Palestinian side. The weakening of the non-Islamist national movement coupled with Hamas’s greater influence almost certainly will hamper the search for an accommodation on this matter. It is early days still, but there is reason to suspect that the rise of the Muslim Brotherhood – notably in Egypt – and the enhanced role of public opinion throughout the region will make it more difficult for Arab leaders to endorse solutions that opponents can portray as inconsistent with Islamic principles.

The implication of all this is not clear. Some critics of Israel’s Jerusalem policy believe that accelerating settlement in the inner core, the encroachment of Jewish settlements into Arab areas in the middle belt and the quickening of planning for E-1 and its corresponding belt along the southern rim threaten the viability of a Palestinian state. Others contend that whatever has been built by acts of political will ultimately can be un-built by acts of political will.

There is truth to both contentions. Viability is a highly amorphous concept, a subjective political judgment passing for objective reality. Claims that the Israeli-Palestinian conflict has reached a territorial tipping point repeatedly surface without empirical backing or persuasive data. But the notion that whatever has been done can be undone is misleading. It underestimates the far greater political cost entailed in evacuating or destroying a settlement than in establishing or expanding one. The more settlers in sensitive locations, the higher the cost to Israel to evacuate them and the less likely that any Israeli prime minister will be willing to pay it – particularly given a 2010 law requiring the approval by popular referendum or a two-thirds Knesset majority of any withdrawal from East Jerusalem. However difficult it would have been for then Prime Minister Ehud Barak to implement a deal dividing Jerusalem in 2000, it is exponentially more so today and will become ever harder tomorrow.

It may be argued that little of this matters, that these challenges are purely theoretical since there are no negotiations in play and – although President Obama’s re-election conceivably might change that – no serious diplomacy in sight. Many, probably most, Palestinians have come to believe that the entire Oslo model is defunct. Many, probably most, Israelis are persuaded that the Palestinian national movement is in no mood, and in no shape, to contemplate the necessary concessions. Some prominent politicians are convinced that if Israel simply sits tight, Palestinians eventually will give up on the city.

Reasons for pessimism abound, as do obstacles on the path to an agreement. Yet, it would be a mistake for the international community simply to throw up its hands and give up. Even as it labours to reconfigure the peace process – as Crisis Group has urged – it remains imperative to prevent settlement construction in E-1, protect the territorial foundations for Jerusalem’s ultimate soft partition and prepare the ground for a mutual recognition of claims.

A negative diplomatic agenda of this sort – preventing harmful developments – is important but cannot suffice. Nor is it likely to be sustainable; over time, it will erode. Also needed is a more positive vision. It is not too early to dust off old proposals for the city, updating them in light of what did not work over a decade ago and what has changed since. Nor is it too late to more assertively support the Arab presence and specifically residential construction in the eastern part of the city, as opposed to simply opposing Jewish building there. The international community, including Jordan, should push for an increase in Arab residential development, in the form of both new neighbourhoods – not a single one has been permitted in the past 45 years – and new housing in existing ones. This is not simply a matter of housing rights, but rather a fundamental political issue of improving Palestinians’ ability to remain in the city and protect Arab Jerusalem.

Jerusalem/Brussels, 20 December 2012