This is the last chance. Sinn Fein must dismantle its military wing

At a pivotal junction in the Northern Ireland peace process, Tony Blair famously said that the participants felt the hand of history on their shoulders. That hand of history had been pretty active before then, and has hardly had a chance to rest since. The peace process has oscillated wildly between giant leaps forward and near-fatal moments of crisis. What is odd about the current situation is that it is indeed a catastrophic moment, but nevertheless one that could also constitute an historic leap.

For now, the Northern Ireland Assembly is suspended. David Trimble's pragmatic unionism is more seriously threatened than ever before by hardliners, both inside and outside his party. The Social Democratic and Labour Party (SDLP) is being swept away by the growing strength of Sinn Fein. On the ground the violence persists from militants on each side. Most specifically, the IRA is still there, a wing of a party supposedly engaged in a peace process.

But there are grounds for optimism, at least in the reaction of political leaders to the changed situation. In interviews, nearly all of them exude a reflective gloom rather than a sense of triumphant defiance. There have been few signs of embryonic politicians happily wiping their hands of their new legislative roles. Instead, Sinn Fein leaders are introspective. Mr Trimble waits in the wings for a new opening rather than insisting that the game is up, come what may.

With the hand of history wavering awkwardly, Mr Blair's speech in Belfast last week was at least as important as the one he made at the beginning of his premiership in May 1997. Then he attempted to reassure Unionists by declaring that he did not expect to see a united Ireland in his lifetime. That speech helped to kick- start the peace process. It had almost died in the fading days of the Major government. Last week Mr Blair was trying to kick-start it again by addressing the grievances of the Unionists once more. I would not be surprised if his speech in 1997 was much on his mind as he delivered his words on Thursday.

This time he was quite explicit in stating that the IRA had to disband. Equally significantly, he implied that the IRA used to give nationalists some leverage in negotiations with the Government, but that was no longer the case. Indeed, the IRA's impact now was entirely counter-productive. Here were two taboos blown away in a single speech. There was no explicit pretence that the IRA had not had an influence in the past. Nor was there any pretence that somehow or other the peace process could stumble along with the IRA "half in, half out".

In the convoluted politics of Northern Ireland this speech was both bold and yet unavoidable. Mr Blair, in other words, had no choice but to be courageous. He cannot move forward without Mr Trimble, and this was the very least that the Ulster Unionists sought from him. Even so, the words were startling. It was, as Mr Blair said, the "crunch". Admittedly, there have been many crunches in Northern Ireland as there have been many fatal crises. But other crunches and crises were shrouded in a fair amount of mist. There were always possible routes on other parts of the misty landscape. This time there was no such room. For once there was no mist.

Mr Blair might not have had any choice but to issue his ultimatum, but that does not invalidate his case. Appealing to the self-interest of Sinn Fein, he argued that the IRA was the best card for hardline Unionists, embarrassed moderate Unionists, and made it harder for the Government to respond to nationalists' concerns.

I suspect that Sinn Fein leaders would almost nod at the first two points. Whether they are convinced that they would get more from the British government without the terrorist threat is another matter. But if Mr Blair had no choice but to be bold, Sinn Fein has no choice but to be convinced. The disbanding of the IRA would be a huge step for them, yet there is no other obvious step available to them.

The step backwards for all those involved in the Assembly – nationalists and Unionists – will become much more tangible this week. In the Commons on Wednesday there will be Northern Ireland Questions for a mere half-an-hour. All the powers exercised by the Assembly have been acquired once more by central government, so Westminster-based MPs will have 30 minutes in which to raise questions on schools, transport and the rest. Last week, the outgoing ministers of the Assembly held meetings with the incoming ministers from London who have taken over responsibility. Apparently the atmosphere at these meetings was businesslike, but with a hint of regret in the air. Local politicians who had a whiff of power, who took decisions that made some impact on the quality of life in Northern Ireland, will be impotent once more. Not only is Sinn Fein's Martin McGuiness no longer education minister – a role he apparently relished – but senior Unionists are deprived of a chance to shine as well. I am told that the DUP's Peter Robinson, better known as a hardline Unionist, was a highly effective minister in charge of social development. Now all he can do is ask questions for a minute or two as others pull the strings. Northern Ireland politicians are back in their powerless vacuum.

The Northern Ireland Assembly was not always a smooth legislative machine. Like the Government's other devolutionary initiatives, it stumbled along awkwardly. In Scotland there is another wave of sleaze stories about its leading politicians. In England elections for mayors attracted derisory turnouts last week. In Wales the national football team made more waves by beating Italy than the Welsh Assembly in Cardiff has ever done. But everywhere the culture has shifted a little towards local decision-making, and in some cases it has shifted quite a lot. For the rest of Britain the tide will not be reversed – even under a future Conservative government – and, in my view, the tide still has a long way to move forward.

Only in Northern Ireland has it been reversed for good cause, and again because the Government had no choice in the matter. Mr Blair has played his final card. Now he cannot do much more. It is up to Sinn Fein to follow the logic of its own previous decision to tip-toe on to a peaceful path and disband its military wing. If it happens, the hand of history will be more firmly clamped on the shoulders of those involved. They can all get on with governing, which is more mundane than top-level meetings with presidents and prime ministers, but more fulfilling in the end.