Abir Dandis, the mother of the two girls who were murdered in the Negev town of Al-Fura’a last week, couldn't find a police officer to listen to her warnings, neither in Arad nor in Ma’ale Adumim. Both police stations operate in areas where Israel wants to gather the Bedouin into permanent communities, against their will, in order to clear more land for Jewish communities. The dismissive treatment Dandis received shows how the Bedouin are considered simply to be lawbreakers by their very nature. But as a resident of the West Bank asking for help for her daughters, whose father was Israeli, Dandis faced the legal-bureaucratic maze created by the Oslo Accords.

The Palestinian police is not allowed to arrest Israeli civilians. It must hand suspects over to the Israel Police. The Palestinian police complain that in cases of Israelis suspected of committing crimes against Palestinian residents, the Israel Police tend not to investigate or prosecute them.

In addition, the town of Al-Azaria, where Dandis lives, is in Area B, under Palestinian civilian authority and Israeli security authority. According to the testimony of Palestinian residents, neither the IDF nor the Israel Police has any interest in internal Palestinian crime even though they have both the authority and the obligation to act in Area B.

The Palestinian police are limited in what it can do in Area B. Bringing in reinforcements or carrying weapons in emergency situations requires coordination with, and obtaining permission from, the IDF. If Dandis fears that the man who murdered her daughters is going to attack her as well, she has plenty of reason to fear that she will not receive appropriate, immediate police protection from either the Israelis or the Palestinians.

Dandis told Jack Khoury of Haaretz that the Ma’ale Adumim police referred her to the Palestinian Civil Affairs Coordination and Liaison Committee. Theoretically, this committee (which is subordinate to the Civil Affairs Ministry) is the logical place to go for such matters. Its parallel agency in Israel is the Civilian Liaison Committee (which is part of the Coordination and Liaison Administration - a part of the Civil Administration under the Coordinator of Government Activities in the Territories).

In their meetings, they are supposed to discuss matters such as settlers’ complaints about the high volume of the loudspeakers at mosques or Palestinians’ complaints about attacks by settlers. But the Palestinians see the Liaison Committee as a place to submit requests for permission to travel to Israel, and get the impression that its clerks do not have much power when faced with their Israeli counterparts. In any case, the coordination process is cumbersome and long.

The Palestinian police has a family welfare unit, and activists in Palestinian women’s organizations say that in recent years, its performance has improved. But, as stated, it has no authority over Israeli civilians and residents. Several non-governmental women’s groups also operate in the West Bank and in East Jerusalem, and women in similar situations approach them for help. The manager of one such organization told Haaretz that Dandis also fell victim to this confusing duplication of procedures and laws. Had Dandis approached her, she said, she would have referred her to Adalah, the Legal Center for Arab Minority Rights in Israel, which has expertise in navigating Israel’s laws and authorities.

John Kerry revealed his long-awaited plan for peace in the Middle East on Sunday, hinging on a $4bn (£2.6bn) investment in the Palestinian private sector.

The US secretary of state, speaking at the World Economic Forum on the Jordanian shores of the Dead Sea, told an audience including Israeli president Shimon Peres and Palestinian leader Mahmoud Abbas that an independent Palestinian economy is essential to achieving a sustainable peace.

Speaking under the conference banner "Breaking the Impasse", Kerry announced a plan that he promised would be "bigger, bolder and more ambitious" than anything since the Oslo accords, more than 20 years ago.

Tony Blair is to lead a group of private sector leaders in devising a plan to release the Palestinian economy from its dependence on international donors. The initial findings of Blair's taskforce, Kerry boasted, were "stunning", predicting a 50% increase in Palestinian GDP over three years, a cut of two-thirds in unemployment rates and almost double the Palestinian median wage. Currently, 40% of the Palestinian economy is supplied by donor aid.

Kerry assured Abbas that the economic plan was not a substitute for a political solution, which remains the US's "top priority".

Peres, who had taken the stage just minutes before, also issued a personal plea to his Palestinian counterpart to return to the negotiations.

"Let me say to my dear friend President Abbas," Peres said, "Should we really dance around the table? Lets sit together. You'll be surprised how much can be achieved in open, direct and organised meetings."

Thick locks hug the front gates of shuttered shops, now covered in graffiti and dust from lack of use. Only a handful of customers pass along the dimly lit road, sometimes stopping to check the ripeness of fruits and vegetables, or ordering meat in near-empty butcher shops.

“All the shops are closed. I’m the only one open. This used to be the best place,” said 64-year-old Mustafa Sunocret, selling vegetables out of a small storefront in the marketplace near his family’s home in the Muslim quarter of Jerusalem’s Old City.

Amidst the brightly coloured scarves, clothes and carpets, ceramic pottery and religious souvenirs filling the shops of Jerusalem’s historic Old City, Palestinian merchants are struggling to keep their businesses alive.

Faced with worsening health problems, Sunocret told IPS that he cannot work outside of the Old City, even as the cost of maintaining his shop, with high electricity, water and municipal tax bills to pay, weighs on him.

“I only have this shop,” he said. “There is no other work. I’m tired.”

Abed Ajloni, the owner of an antiques shop in the Old City, owes the Jerusalem municipality 250,000 Israeli shekels (68,300 U.S. dollars) in taxes. He told IPS that almost every day, the city’s tax collectors come into the Old City, accompanied by Israeli police and soldiers, to pressure people there to pay.

“It feels like they’re coming again to occupy the city, with the soldiers and police,” Ajloni, who has owned the same shop for 35 years, told IPS. “But where can I go? What can I do? All my life I was in this place.”

He added, “Does Jerusalem belong to us, or to someone else? Who’s responsible for Jerusalem? Who?”

Illegal annexation

Israel occupied East Jerusalem, including the Old City, in 1967. In July 1980, it passed a law stating that “Jerusalem, complete and united, is the capital of Israel”. But Israel’s annexation of East Jerusalem and subsequent application of Israeli laws over the entire city remain unrecognised by the international community.

Under international law, East Jerusalem is considered occupied territory – along with the West Bank, Gaza Strip and Syrian Golan Heights – and Palestinian residents of the city are protected under the Fourth Geneva Convention.

Jerusalem has historically been the economic, political and cultural centre of life for the entire Palestinian population. But after decades languishing under destructive Israeli policies meant to isolate the city from the rest of the Occupied Territories and a lack of municipal services and investment, East Jerusalem has slipped into a state of poverty and neglect.

“After some 45 years of occupation, Arab Jerusalemites suffer from political and cultural schizophrenia, simultaneously connected with and isolated from their two hinterlands: Ramallah and the West Bank to their east, West Jerusalem and Israel to the west,” the International Crisis Group recently wrote.

Israeli restrictions on planning and building, home demolitions, lack of investment in education and jobs, construction of an eight-foot-high separation barrier between and around Palestinian neighbourhoods and the creation of a permit system to enter Jerusalem have all contributed to the city’s isolation.

Formal Palestinian political groups have also been banned from the city, and between 2001-2009, Israel closed an estimated 26 organisations, including the former Palestinian Liberation Organisation headquarters in Jerusalem, the Orient House and the Jerusalem Chamber of Commerce.

Extreme poverty

Israel’s policies have also led to higher prices for basic goods and services and forced many Palestinian business owners to close shop and move to Ramallah or other Palestinian neighbourhoods on the other side of the wall. Many Palestinian Jerusalemites also prefer to do their shopping in the West Bank, or in West Jerusalem, where prices are lower.

While Palestinians constitute 39 percent of the city’s population today, almost 80 percent of East Jerusalem residents, including 85 percent of children, live below the poverty line.

“How could you develop [an] economy if you don’t control your resources? How could you develop [an] economy if you don’t have any control of your borders?” said Zakaria Odeh, director of the Civic Coalition for Palestinian Rights in Jerusalem, of “this kind of fragmentation, checkpoints, closure”.

“Without freedom of movement of goods and human beings, how could you develop an economy?” he asked.

“You can’t talk about independent economy in Jerusalem or the West Bank or in all of Palestine without a political solution. We don’t have a Palestinian economy; we have economic activities. That’s all we have,” Odeh told IPS.

Israel’s separation barrier alone, according to a new report by the United Nations Conference on Trade and Development (UNCTD), has caused a direct loss of over one billion dollars to Palestinians in Jerusalem, and continues to incur 200 million dollars per year in lost opportunities.

Israel’s severing and control over the Jerusalem-Jericho road – the historical trade route that connected Jerusalem to the rest of the West Bank and Middle East – has also contributed to the city’s economic downturn.

Separation of Jerusalem from West Bank

Before the First Intifada (Arabic for “uprising”) began in the late 1980s, East Jerusalem contributed approximately 14 to 15 percent of the gross domestic product (GDP) in the Occupied Palestinian territories (OPT). By 2000, that number had dropped to less than eight percent; in 2010, the East Jerusalem economy, compared to the rest of the OPT, was estimated at only seven percent.

“Economic separation resulted in the contraction in the relative size of the East Jerusalem economy, its detachment from the remaining OPT and the gradual redirection of East Jerusalem employment towards the Israeli labour market,” the U.N. report found.

Decades ago, Israel adopted a policy to maintain a so-called “demographic balance” in Jerusalem and attempt to limit Palestinian residents of the city to 26.5 percent or less of the total population.

To maintain this composition, Israel built numerous Jewish-Israeli settlements inside and in a ring around Jerusalem and changed the municipal boundaries to encompass Jewish neighbourhoods while excluding Palestinian ones.

It is now estimated that 90,000 Palestinians holding Jerusalem residency rights live on the other side of the separation barrier and must cross through Israeli checkpoints in order to reach Jerusalem for school, medical treatment, work, and other services.

“Israel is using all kinds of tools to push the Palestinians to leave; sometimes they are visible, and sometimes invisible tools,” explained Ziad al-Hammouri, director of the Jerusalem Centre for Social and Economic Rights (JCSER).

Al-Hammouri told IPS that at least 25 percent of the 1,000 Palestinian shops in the Old City were closed in recent years as a result of high municipal taxes and a lack of customers. “Taxation is an invisible tool…as dangerous as revoking ID cards and demolishing houses,” he said. “Israel will use this as pressure and as a tool in the future to confiscate these shops and properties.”

Israeli and Palestinian leaders are expected to start to sketch the contours of a Palestinian state next week. Condoleezza Rice, the US Secretary of State, ended a 24-hour shuttle between Jerusalem and Ramallah yesterday, convinced that the two sides were ready to discuss fundamental issues in advance of President Bush's Middle East peace conference, now tentatively planned to take place in Washington in November.

Mahmoud Abbas, the Palestinian President, said that, after meeting Ms Rice, he was ready to negotiate a declaration of principles as an interim step. "What is important is that we arrive at a result and that we know what that result is, what is the roof that we need to reach and what are the stages of implementation that we can agree on," he said.

Israeli spokesmen were reluctant to commit themselves on the record, but Israeli diplomatic correspondents reported that Ehud Olmert, the Prime Minister, had proposed negotiating "agreed principles" to Ms Rice over dinner on Wednesday.

Neither national leader is strong enough now to sign a final agreement. Mr Abbas's Fatah group has lost Gaza to Hamas and is still consolidating its hold on the West Bank. Mr Olmert is beset by scandals and investigations.

A declaration of principles is designed to give the Palestinians the "political horizon" they have demanded. The negotiators will not attempt to solve the core issues of final borders, Jerusalem and refugees at this stage.

It is also meant to offer an incentive to Saudi Arabia and other "moderate" Arab states to attend the autumn conference. Prince Saud al-Faisal, the Saudi Foreign Minister, said after talks with Ms Rice in Riyadh on Wednesday: "When we get an invitation to attend, we will study it and we will be keen to attend." He insisted, however, that the conference had to "deal with the heart of the peace process".

Mr Olmert's office responded with a statement saying he "shares the same approach, that the international meeting will be serious and meaningful, and he welcomes the participation of leaders of Arab countries". Tzipi Livni, the Israeli Foreign Minister, assured the US that "Israel is not going to miss this opportunity".

Ms Rice reinforced the message in Ramallah: "The President of the United States has no desire to call people together for a photo op. This is to call people together so that we can really advance Palestinian statehood."

She has made no attempt to contact Hamas. To strengthen Mr Abbas in his power struggle with the Islamic movement, she signed an agreement granting his government $80m (£40m) to enhance his security forces.

Sami Abu Zuhri, a Hamas spokesman, denounced the deal. "Rice is not coming to establish a Palestinian state but to build death squads that will work against resistance groups, including Hamas," he said.

In Gaza, Hamas's Executive Force shot dead three Islamic Jihad and Fatah gunmen yesterday and wounded seven after they refused to hand over their weapons. The force commander Islam Shahwan said: "Nobody is above the law - families or factions."

UN monitors reported yesterday that the economic situation in Gaza continues to deteriorate. "The total accumulative and direct losses since the closure of the Gaza crossings in mid-June are now reaching about $23m, with an average daily loss of $500,000."

Hamas officials recently banned the distribution in Gaza of three West Bank newspapers that support Mr Abbas's government. They also took a critical television talk show, recorded in Gaza, off Palestinian screens.

Shifa hospital, the biggest in the Gaza Strip, is running out of drugs. It is performing emergency operations only. The CAT scanner is out of service for want of spare parts. The orthopaedic department no longer has plaster of Paris. Hospital managers appealed yesterday to the international community to lift the siege on Gaza, which imposed after Hamas seized control in June.

Dr Juma al-Saqa, a hospital spokesman, told reporters they needed 150 tons of medicines urgently. On Monday, Israel allowed the Red Cross to bring in 50 tons. That was not enough.

Dr Moaya Abu Hasnein, the director of accident and emergency, said dozens of cancer and kidney patients were slowly dying because of the boycott. While the Rafah crossing, formerly manned by European Union monitors, remained closed, it was impossible to transfer patients to Egypt. He reported that about 700 emergency cases had been sent to hospitals in Israel and the West Bank over the past month, but that left many more behind.

Palestinian doctors are trapped in the political crossfire between the Fatah government on the West Bank and its Hamas rival in Gaza. "Our job is to administer services to the Palestinian people. We are not politicians," said Dr Abu Hasnein despairingly.

The war of words between Fatah and Hamas continues. Mahmoud Zahar, the former Hamas foreign minister, presented reporters yesterday with 30 documents seized from conquered Fatah bases in Gaza, which he said showed that Fastah stole millions of dollars of the "money of the Palestinian people".

In Moscow yesterday, Russia's President, Vladimir Putin, endorsed the visiting President Mahmoud Abbas as the "legitimate leader all the Palestinians".

The Arab League flag was not flying alongside the Star of David over Jerusalem. That seal of approval will have to wait for a peace agreement. But there was a whiff of optimism yeterday, a sense of opportunity, in the shimmering summer air. The coming months will test whether it is mirage or substance.

Tony Blair, in his new incarnation as international peacemaker, felt it earlier in the week. So did the foreign ministers of Egypt and Jordan, who arrived yesterday to persuade Israel to accept the 2002 Arab peace initiative, which offers recognition by all 22 Arab states in return for evacuation of lands occupied since the 1967 war.

The visit was heralded by Israel as a historic first. Whatever the diplomatic niceties, the pair were sent by the Arab League and will report back to its council of ministers next Monday. They hope to return with new ideas.

Ehud Olmert, the Prime Minister, told the Arab ministers that Israel was ready to discuss the initiative with "an open heart and an open head", though he still has reservations about some of its details, notably the "right" of Palestinian refugees to return to their old homes in Israel.

Tzipi Livni, the Foreign Minister, denied that Israel was stringing the Palestinians along. "Stagnation is not an option," she insisted. "A large segment of the Israeli population strives to advance a process that will lead to two states existing side by side... This is a crucial point in time. The Arab initiative is a historic opportunity for the Israeli-Arab and the Israeli-Palestinian peace process. We mustn't waste this opportunity."

Ahmed Aboul Gheit, the Egyptian Foreign Minister, said: "We feel it is Israel's intent to seriously work towards helping the Palestinians to achieve statehood... But talk alone will not do. We must move ahead in such a way that the Palestinians will sense that there is hope."

Abdel Ilah Khatib, Jordan's Foreign Minister, reinforced the message: "We came here to propose an Arab initiative for a comprehensive peace which grants legitimacy to the establishment of a Palestinian state with territorial continuity. To move on with the peace process we must create the necessary atmosphere." Israel, he maintained, had first of all to restore Palestinian freedom of movement.

Israeli and Arab ministers stressed, however, that the Arab League was not negotiating on behalf of the Palestinians. In public, at least, no one addressed the embarrassing fact that there are two Palestinian governments, one on the West Bank loyal to President Mahmoud Abbas, which embraces a two-state solution, and one in the Gaza Strip commanded by Hamas, which refuses to recognise Israel.

Shlomo Ben-Ami, a former Israeli foreign minister, argued earlier this week if the radicals are left out of the process, they will continue to act as spoilers.

All 15 women presenters reported for work at the official Palestine Television station in Gaza yesterday, in defiance of death threats by a radical Islamic group that is believed to have links with al-Qa'ida. The Righteous Swords of Islam warned that it would strike the women with "an iron fist and swords" for refusing to wear a veil on camera.

"It is disgraceful that the women working for the official Palestinian media are competing with each other to display their charms," it said in a leaflet distributed in Gaza at the weekend. "We will destroy their homes. We will blow up their work places. We have a lot of information about their addresses and we are following their movements."

The fringe group threatened to "slaughter" the women for corrupting Palestinian morals. "The management and workers at Palestine TV should know," it warned, "that we are much closer to them than they think. If necessary, we will behead and slaughter to preserve the spirit and morals of our people."

About half the women TV journalists wear the traditional hijab head covering, but all show their faces and wear makeup. They mounted a vigil yesterday outside the Gaza City office of the Palestinian President, Mahmoud Abbas, demanding protection and respect.

Lana Shaheen, who heads the station's English-language programmes, told The Independent: "Of course we are afraid. Previously this group threatened Internet cafes and video shops, then burned them. We will protect ourselves."

She insisted the women would continue working. "We will not change... our lives. We've worked through Israeli bombardments and attacks, just like the men. It's a national obligation."

Mohammed al-Dahoudi, the director-general of Palestine TV, said they were taking the threats seriously. "In the current security chaos, everything can happen in Gaza. There is incitement from some groups against television. We will continue to work as usual, but we will take precautions. We have to be careful."

He recalled previous attacks by Muslim radicals on local offices of the Saudi-owned Al Arabiya TV; another station, Voice of the Workers; and Palestine TV's own branch in Khan Yunis. In recent weeks, militants campaigning against Western influence have also vandalised an American school and a Christian bookshop. Bassam Eid, director of the Palestinian Human Rights Monitoring Group, accused the radicals of behaving like the Taliban in Afghanistan. "Gaza has become Hamasistan. They are trying to drag Palestinian society back to the dark ages."

As the prospect of peace recedes and poverty spreads, Palestinians have become more traditional. Bars and cinemas have closed. Many educated, middle-class women now cover their heads, but hardly anyone, even in the villages, wears the niqab veil.

* Despite a sharp decline in the number of rocket attacks from Gaza, Ehud Olmert, the Israeli Prime Minister, vowed yesterday to continue military operations in Gaza and the West Bank. Four Israeli soldiers were wounded yesterday when Palestinian fighters fired mortars at the Erez passenger crossing between Gaza and Israel. Earlier, troops shot dead a Fatah gunman in the West bank town of Jenin.