US hawks deliver victory to Sharon in battle over Arafat

Game and set - if not match - to Ariel Sharon. Yasser Arafat, long frozen out of the Bush White House, is no longer perceived by the Americans as the legitimate leader of the Palestinian people.

The Palestinians can no longer expect anything in the near future beyond a vague "provisional state", and even that will depend on them electing different leaders.

For their part, the Israelis were presented with a "to do" list by Mr Bush that contained so many conditions that they will have no difficulty in consigning it to the back burner.

George Bush finally gave his long-awaited speech on the Israel-Palestinian conflict last night. The document had created acrimonious divisions between the administration's hawks and the State Department. The hawks won.

There was little in the speech that looked like a remedy to a conflict that has claimed more than 2,000 lives, and appears to be getting steadily worse.

Mr Bush did not name Yasser Arafat, but his meaning was clear: "Peace requires a new and different Palestinian leadership, so that a Palestinian state can be born," he said. "I call on the Palestinian people to elect new leaders, leaders not compromised by terror."

Not so long ago, State Department officials were talking about the need to keep Yasser Arafat because he was the only leader the Arab world would accept. That, it seems, is over.

Israel's guarded official statement concealed real delight with the speech. In the last 15 months, Mr Sharon has managed to reoccupy Palestinian-run land, tear up the infrastructure of the Palestinian Authorityand carry out scores of assassinations. Mr Bush talked only of Israel's right to defend itself, in effect endorsing these practices. There was also speculation that it would be seen as a signal to finally go after Mr Arafat himself.

Mr Sharon's office said that "when the Palestinian Authority undergoes genuine reforms and a new leadership takes it place at its head ... it will be possible to discuss ways of moving forward by diplomatic means."

Startlingly, Mr Arafat's office seemed to ignore the speech's central message. It welcomed Mr Bush's ideas, describing them as "a serious effort to push the peace process forward".

Mr Bush waxed lyrical on the merits of democracy – and even, breathtakingly, suggested that Arab states, not exactly known for their democratic structures, should help to build its institutions.

But he made no bones that the United States will only support Palestinian statehood if the electors chose a leader other than Mr Arafat. Even then, the US will only back a state whose "borders and ... sovereignty will be provisional until resolved as part of a final settlement."

The President equated the Palestinian suicide attacks to the "terror" against which Americans is fighting a war, rather than murderous assaults which – though utterly unjustifiable – are mounted in the name of ending Israel's illegal 35-year occupation of Arab lands, and of avenging the civilians killed by the Israeli army.

Mr Sharon's aim has long been to persuade the world that there is no difference between Palestinian militants, and al-Qa'ida. Last night, he partly achieved this.

The Palestinians sought solace in Mr Bush's references to the "occupation", the issue which they say lies at the heart of their intifada. Mr Bush also said "permanent occupation" – suspected by many to be Mr Sharon's aim – "threatens Israel's identity and democracy," and spoke of a "viable state", another important buzzword to the Palestinians.

But there was little to suggest this speech will make much difference to the nightmare on the ground. Mr Bush talked of the need for Israel to withdraw to the positions before the start of the intifada in late September. But the withdrawal should be made "as we make progress toward security.'' One suicide bomber attack would allow Israel to argue that progress has not been made.

Israeli settlement activity in the occupied territories must end but this should be "consistent with the recommendations of the Mitchell report", he said. This, too, ensures that Israel can stall – as it long ago re-cast the recommendations to include a timeline.

Mr Bush suggested a three-year timeline for his two-state "vision" to become reality. "As new Palestinian institutions and new leaders emerge, demonstrating real performance on security and reform, I expect Israel to respond and work toward a final-status agreement." This is likely to mean that if Israel decides the leadership is not demonstrating "real performance", the Palestinians can forget about a state.

Exactly where the new leaders will come from is not clear. Elections today would deliver a strong showing for Hamas, classed by the US as terrorist.

Palestinians were crestfallen last night but unsurprised. "This is going to have an opposite effect to the one he intended," Jihad al-Wazir, a Palestinian minister, said. "Telling the Palestinians to get rid of Yasser Arafat will have the effect of sending his ratings up. We will hold an election and Mr Arafat will win it. And then what's going to happen. No state?"