Fundamental to Israel's problem is that they want "security" while they keep oppressing Palestinians and grabbing more land. They do not want peace- quite the opposite, peace means establishing fixed borders, possibly evacuating illegal settlements, not having an excuse for further expansion, etc. They want a permanent state of attrition that allows them to keep doing what is convenient to them while being safe from all reprisals.
This was said clearly by one of Sharon's advisors explaining the motives for Israel removing settlements from Gaza:
"The significance of the disengagement plan [from Gaza] is the freezing of the peace process, and when you freeze that process, you prevent the establishment of a Palestinian state, and you prevent a discussion on the refugees, the borders and Jerusalem."
And not to mention Hamas got so big because of Israel actually funding them.
Why fund them? Because for whatever reasons, in his later years, Arafat and the PLO were becoming tired of endless conflict and far more diplomatic and open to negotiation. This lead to increasing criticism of Israel because now they were being seen as the stubborn party, refusing to compromise, and increased sympathies for the plight of Palestine.
Israel's hard-right plan for responding to that? Fund Hamas to "beat" the PLO and provide a better target/focus of attention for disdain.
> Why fund them? Because for whatever reasons, in his later years, Arafat and the PLO were becoming tired of endless conflict and far more diplomatic and open to negotiation.
Whatever else you think, let's be clear-eyed about the history of Arafat here. Arafat walked away from his negotiations with Israel, despite what many think were fairly good offers for peace and a two-state solution. (It's common nowadays to think the offers weren't very good, but I disagree, and in any case walking away from negotiations is the opposite of pursuing peace.)
There is very little reason to think that the Palestinians wouldn't have a state today, if Arafat was willing to compromise more with Israel (even after potentially more negotiation).
> Whatever else you think, let's be clear-eyed about the history of Arafat here.
I definitely don't intend to make Arafat out to be some peace-loving martyr. Maybe not emphasized enough, but my intent in describing him as I did was to say that it was only after decades of violent resistance (regardless of the merit) that he "softened" near the end. And certainly around then there were some decent offers and proposals.)
This was said clearly by one of Sharon's advisors explaining the motives for Israel removing settlements from Gaza:
"The significance of the disengagement plan [from Gaza] is the freezing of the peace process, and when you freeze that process, you prevent the establishment of a Palestinian state, and you prevent a discussion on the refugees, the borders and Jerusalem."