The Middle East is immersed in its worst crisis in years following the capture of three Israeli soldiers by the Palestinian Islamic Resistance Movement (Hamas) and Lebanese Party of God (Hizbollah) in late June 2006 and early July, Israel’s comprehensive offensive throughout the Gaza Strip and Lebanon, and the daily firing of rockets deep into Israel. And horrific as it is, the current toll of death and destruction could reach entirely different proportions should a new threshold be crossed – a Hizbollah rocket that strikes a chemical plant or a heavily populated area in Tel Aviv or Haifa, an Israeli bombing raid resulting in massive casualties, a major ground offensive, or the expansion of the war to Syria or Iran. A political solution to the twin crises of Lebanon and Palestine must be the international community’s urgent priority. Waiting and hoping for military action to achieve its purported goals will have not only devastating humanitarian consequences: it will make it much harder to pick up the political pieces when the guns fall silent.

This report pieces together the strands of this multi-headed crisis in Israel, the occupied Palestinian territories, Lebanon and elsewhere, based on talks with officials and others, including Hamas and Hizbollah representatives. There are many dimensions to the explanation of why the capture of three soldiers has, so suddenly and so intensely, escalated at an extraordinary pace into a deep and widespread conflict: local ones like Hamas’s struggle to govern and Hizbollah’s desire to maintain its special status in Lebanon; regional ones, notably the ongoing Arab-Israeli conflict, Syria’s interests in Lebanon, and the growing Sunni-Shiite divide; and wider international ones, especially the confrontation between Washington and Tehran.

As the international community wrestles with this crisis, analysis from the ground suggests several key principles that ought to be followed.

First, the Gaza and Lebanon crises need to be dealt with separately. Though related both chronologically and in terms of the sparks that triggered them, the reasons behind Hamas’s action have little to do with those motivating Hizbollah’s. Bundling them together only complicates efforts at resolution.

Secondly, resolution of the Palestinian crisis should rest on a simple equation: governance in exchange for a cessation of hostilities. Of the two crises, the Palestinian one is relatively simpler to address: its origins are bilateral in nature (Hamas versus Israel), and so too can be its resolution. Hamas’s message is straightforward: let us govern, or watch us fight. Governing, as Crisis Group recently reported, is what the Islamists have not been permitted to do. The strategy of Fatah, the wider Arab world, Israel and the West alike since the 25 January parliamentary elections has been to isolate and squeeze the Palestinian government in order to precipitate its collapse. The approach was always short-sighted and dangerous and it urgently needs to be revised. A deal appears attainable and should be pursued. It involves a prisoner exchange; a restored truce and – if any resulting tranquillity is not to be fleeting – an end to the international boycott of the Palestinian Authority (PA) government.

That boycott never made much sense in terms of Europe’s and America’s stated objective of inducing change in Hamas’s positions and policies. It makes even less sense now if the goal is to prevent all-out deterioration. The 25 June 2006 signing of a National Conciliation Document by Fatah, Hamas and other Palestinian organisations on the basis of the Prisoners’ Initiative, the decision to form a national unity government and the designation of President Abbas as the person in charge of negotiations with Israel do not quite add up to the conditions put forward by the Quartet for normalising its relations with the PA government. But incomplete as they may be, they should be enough – together with a reciprocal and monitored ceasefire – to trigger a different approach by the international community or, if the U.S. is not yet prepared to go along, at least by the EU and other Quartet members.

Thirdly, an immediate Israeli-Lebanese ceasefire is necessary: pursuing a military knockout is unrealistic and counterproductive. The Lebanese case is far more complex. What potentially might have been yet another chapter in the ongoing tit-for-tat between Israel and Hizbollah has become something very different. The brazen nature of the initial Hizbollah operation, coupled with the fact that it closely followed Hamas’s capture of one of its soldiers, lent it, in Israeli eyes, an entirely new meaning. Fearing a dangerous erosion of its military deterrence on two fronts simultaneously, the new government quickly escalated in an effort to achieve decisive outcomes against its adversaries. Hizbollah followed suit, for the first time launching rockets deep into Israel. Step by rapid step, the stakes and nature of the conflict have shifted: Israel increasingly sees it as a battle for its and the region’s future; Hizbollah – torn between its identity as a Lebanese/Shiite movement and a messianic Arab-Islamist one – has increasingly slipped into the latter. On both sides, a tactical fight is metamorphosing into an existential war.

The key to managing this conflict, therefore, is to ensure it reverts to more manageable size by producing a ceasefire that puts an immediate, reciprocal end to attacks. To achieve that goal will require agreement on two steps that would rapidly follow: a prisoner swap and an understanding between all parties (Hizbollah included) that the current UN presence in South Lebanon will be strengthened with a multinational force. Injection of such a force carries considerable risk, as Lebanon’s history suggests: given the depth of confessional divisions in Lebanon, it could trigger a deadly civil conflict. But in the absence of a strong Lebanese army, and given legitimate Israeli concerns, it has become a regrettable necessity. Bearing all this in mind, and mindful too of sobering lessons from Iraq, any such force should have a limited mandate (principally verifying adherence to the ceasefire), be authorised by the UN Security Council, work closely with the Lebanese army, and ensure it does not become an unwitting party to Lebanon’s sectarian battles.

Anything more ambitious at this time – including Israel’s desire to prolong military efforts until Hizbollah is crippled, and dispatch of a force charged with disarming the movement or full implementation of UN Security Council Resolution 1559 – could bring Lebanon to breaking point, risking more loss of life and serious escalation. Israeli and U.S. hopes that Hizbollah can rapidly be cut down to size, that the Lebanese government will confront it and its civilians rise against it, fly in the face of history. Hizbollah has not been significantly weakened nor, despite broad anger at its action, has its position on the Lebanese scene markedly eroded. In the past, Israeli military operations have only bolstered militant elements and, over time, rallied domestic opinion around them. The central government is not now, nor will it be soon, in a position to act against a movement that represents a critical domestic constituency and is present at all national levels – the government included. Should Hizbollah and its allies be pushed in a corner, they are liable to react, even at the cost of destabilising the country as a whole, disrupting its precarious inter-confessional balance and plunging it into a new round of sectarian strife.

Achieving the desired outcome while minimising risks to Lebanon’s stability will require the EU and UN to continue talking to Hizbollah despite pressures to cease. It also will require engagement with Syria, preferably by the U.S. Damascus repeatedly has demonstrated its nuisance capacity in Lebanon; it needs to be given incentives to cooperate, along with clear warnings if it does not.

Fourthly, to be sustainable, the ceasefire needs to be urgently followed by intensive diplomatic efforts to tackle root causes – all of them. A ceasefire by definition will be fragile and at best temporary, for it does not meet core concerns. Israel would be left with a hostile, armed force to its north; Lebanon with the reality of an autonomous militia and a southern neighbour eager to eradicate Hizbollah; and both the latter and its Syrian ally with unaddressed political issues. The U.S. is correct in asserting that “root causes” need to be addressed, but this cannot be done selectively nor should the international community stop half-way by focusing exclusively on Hizbollah’s status.

Recent history should serve as a guide. The international community has identified important goals but gone about achieving them in all the wrong ways: UN Security Council Resolution 1559’s fundamental flaw was that it aimed at internationalising the Hizbollah question without regionalising the quest for a solution. It is not possible to remove Hizbollah’s arms without dealing with the justifications it invokes for maintaining them; to remake Lebanon by focusing on Hizbollah at the expense of broader questions related to the confessional distribution of power; and to do all this by isolating and targeting Syria, not involving it. Instead, continuous, robust and comprehensive diplomatic effort is required on several levels simultaneously: