All in all it was a pretty mild endorsement, he only used the term "Palestinian state" three times and just one of those was in reference to an actual homeland for the Palestinians. And there were a few strings attached: the Palestinians would have to recognize Israel as a nation itself, give up claims to Jerusalem, give up claims of the "right of return" for Palestinians displaced by Israel's founding in 1948, not form a military, not control their own airspace, not form military agreements with other countries, and had to accept the continued growth of Israeli settlements in their territory. But they can have their own flag and anthem. (The full text of the Netanyahu speech is here).
So really it's not a very historic speech after all since the Palestinians will never accept the conditions Netanyahu is putting on them (in fact they've already rejected his offer). In many ways, the speech really was another round in an ongoing battle between Netanyahu and Barack Obama over the issue of Israeli settlements inside what the Palestinians hope one-day will be Palestine.
There are two problems with Israel and its settlements: first they're illegal under international law - an occupying country (Israel) can't just move its citizens into occupied lands. Second, Israel agreed to halt "all settlement activity" as part of the 2003 'Roadmap to Peace' with the Palestinians. Now the Bush Administration let Israel slide with a wink and a nod, not protesting as they continued to build and expand settlements in violation both of international law and their 2003 pledge. Netanyahu mentioned his handshake deal with Bush to Obama after he was sworn in as President, Obama in turn told him it’s a new day and a new administration and that the settlement activity had to stop.
Netanyahu has agreed, sort of - Israel won't build any new settlements, but they insist on 'natural growth' of the existing ones, meaning the settlements should be allowed to expand as their populations grow. There are about 500,000 Israelis living in settlements, which makes for a lot of growth...So far it's not an argument the Obama Administration is buying.
The problem for the two leaders is that neither one of them can afford to back down on the settlement issue. Obama recently gave his own major speech in Cairo, the Muslim world (a lousy term for such a diverse collection of countries and cultures, but an easy bit of shorthand to reference a big chunk of the globe) is looking for a different policy from America, and they're interested in concrete action, not just moving speeches. If Obama gives in on the settlements, it will likely be taken as a sign by the Muslim world that nothing's really changed as far as American policy. Netanyahu, meanwhile, is catching flak from members of his own ruling coalition for even suggesting there might be a Palestinian state and for putting any limits on the settlements.
But something has to give. The status quo has gone on too long. The Saudis earlier in the year said that their own peace proposal - peace between Israel and all the Arab states if Israel leaves the Occupied Territories - wouldn’t stay on the table much longer. Meanwhile Obama either has to take a hard-line with Netanyahu over the settlements or risk seeing his plans for a new relationship with the Muslim world fall apart. And Sunday's speech aside, Netanyahu is hoping not for history, but more of the same.
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