For much of its history, Israel has focused on the neighbouring Arab states and Palestinians living in the occupied territories. Too often overlooked has been the status of those Israeli citizens who are Arab.^[fn]The issue of terminology relating to this subject is sensitive and at least partially a reflection of political preferences. Most Israeli official documents refer to the Israeli Arab community as "minorities". The Israeli National Security Council (NSC) has used the term "Arab citizens of Israel". Virtually all political parties, movements and non-governmental organisations from within the Arab community use the word "Palestinian" somewhere in their description – at times failing to make any reference to Israel. For consistency of reference and without prejudice to the position of either side, ICG will use both Arab Israeli and terms the community commonly uses to describe itself, such as Palestinian citizens of Israel or Palestinian Arab citizens of Israel.Hide Footnote  They have attracted national attention only at times of heightened crisis, and even then in a highly reactive fashion. Unless systemic inequities facing Arab Israelis are addressed and an inclusive process is launched to define the state's long-term attitude towards this segment of its citizenry, prospects for internal strife and instability will remain high.

Israel's Palestinian Arab citizens -- almost 20 per cent of the population -- are largely cut off from the geographical, cultural, economic and political mainstream. They enjoy political rights unknown to many in the region but nonetheless are subject to various forms of discrimination, some direct and official, others less so. These affect the three most fundamental assets of democratic society: resources, rights and representation. Some of the more grievous cases involve the predominantly Bedouin population of the so-called unrecognised villages, which is deprived of rudimentary services and subjected to seemingly arbitrary home demolitions.

These longstanding tensions were largely concealed during the Oslo peace process, which ushered in an era of hope for Israel's Jews and Arabs alike, but they surfaced anew after the start of the Palestinian intifada in the West Bank and Gaza in September 2000. In the next month, Arab Israeli demonstrations motivated by solidarity with fellow Palestinians but powerfully fuelled by deeper community grievances led to the deaths of thirteen protesters. It would be wrong to see the October events as an accurate reflection of the general mood among Arab Israelis. But it would be equally misleading to view them as a one-time phenomenon. Triggered by developments in the occupied territories, they were made possible by a history of political, economic and social discrimination and neglect within Israel and had been preceded by smaller local clashes over land confiscations. October 2000 was a serious warning that integration of Israel's Arab minority has failed to date.

The problem is not easily resolved because it goes to the heart of Israel's self-definition as both a Jewish and a democratic state and because of the multi-layered nature of inter-communal relations -- an Arab minority living in a Jewish state in conflict with its far more populous Arab neighbours. Mutual perceptions are characterised at best by indifference, at worst by total misunderstanding, mistrust and hostility. Many Jewish Israelis question the willingness of their Arab fellow citizens to come to terms with the existence of the state. Arab Israelis often are perceived as a security threat and a political/demographic time bomb. With allegations of cooperation between Arab Israelis and Palestinian militant organisations since the intifada, such perceptions have further solidified. Conversely, Israel's Palestinian citizens perceive a state that for the most part is unwilling either to respect their individual rights or to recognise their collective identity and seeks instead to limit their political weight and demographic presence. Increased tolerance within the Israeli polity for extremist rhetoric, combined with hostile legislation and participation in the government of parties openly advocating the transfer of Arab citizens beyond Israel's borders has further heightened tensions.

It is little comfort that more generalised violence does not appear to be on the immediate horizon since greater political polarisation, accumulated frustration among Arab Israelis, deepening Arab alienation from the political system, and the deteriorating economic situation create a dangerous and volatile mix. Some believe that resolving Israel's external conflict with the Palestinians will de facto resolve its internal one as well. The situation of Arab Israelis would indeed be likely to improve significantly. But at the same time separation from the occupied territories would turn the spotlight on the Arab Israeli community and force Israel's two populations to address their longer-term relationship. If a process is not set in motion to integrate Israel's Palestinian citizens better and to think seriously about a new, more inclusive, non-discriminatory political contract, Israel faces the prospect of a growing community in its midst that will be increasingly hostile. The result would be a self-fulfilling prophecy: second-class citizens directly threatening its cohesion and stability.

Amman/Brussels, 4 March 2004