Seventeen years after the Oslo process began, and following spectacular failures by Israeli prime ministers Ehud Barak in 2000 and Ehud Olmert in 2008 to create a Palestinian state through bilateral negotiations, the cause of Israel-Arab peace is going nowhere. All three principal actors—Israel, the Palestinians, and the U.S. administration—are displaying political weakness, political or ideological reservations, or diplomatic ineptitude. They are seemingly incapable of convening meaningful talks, to say nothing of succeeding at them.Against this glum backdrop, there is only one success story: the Palestinian Authority’s state-building effort, a unique example of positive Palestinian achievement in the fields of security, economics, and institution-building. Given that bilateral talks appear to have failed, the state-building plan has a political endgame—international recognition of a Palestinian state—that must be addressed soon. What’s more, it holds out the possibility of serving Israeli as well as Palestinian interests.This is not the sort of unilateral declaration of independence that was trumpeted in the 1990s by Yasser Arafat. In contrast, this Palestinian plan is to be activated only if and when the institutions of state are in place in the West Bank and bilateral peace talks are deemed to have failed. Happily, the institutions increasingly are in place; sadly, the U.S.-sponsored peace talks are already a failure. At some point next September, the Palestinian Liberation Organization, the internationally recognized representative of the Palestinian people, will have built up sufficient diplomatic momentum through the recognition of statehood by a growing community of nations that it is almost certain to ask the United Nations for recognition of a state within the 1967 borders, including Jerusalem.Notably, the PLO is not expected to ask the United Nations to pronounce on refugees and their right of return or on control of the Temple Mount in Jerusalem. This is important: These two existential issues have been the biggest deal breakers in the repeated attempts to negotiate a comprehensive settlement, both officially and in informal meetings, attempts with which I have been associated for more than two decades.For it is here that the narratives of Israel and the PLO clash most resoundingly—even as the two parties agree on the need for two states side by side. In direct talks, the PLO insists there can be no formal deal on borders without Jerusalem acquiescing to a right-of-return agreement that certifies for future generations that Israel was “born in sin” in 1948. And it demands (because “there never was a temple there”) that Israel cede full sovereignty and control over the Temple Mount to the Palestinians. But within the framework of a unilateral/international partial solution at the United Nations, the PLO is prepared to postpone resolution of precisely these two issues in order to achieve a two-state solution.In responding to this Palestinian plan, which is coordinated fully with the Arab League, Israel is in a paradoxical position. On the one hand, it supports the Palestinian Authority’s state-building program; on the other, it opposes the PLO’s effort to recruit international support for a U.N. declaration of Palestinian statehood. Prime Minister Benjamin Netanyahu’s government appears to be relying on an American veto in the Security Council. Yet this is not at all a certainty: The Obama Administration takes a much more international approach to Middle East issues than did its predecessors, and it is clearly unhappy with Netanyahu’s policies. Note that last fall, in the course of efforts to persuade Netanyahu to extend the settlement freeze, President Barack Obama reportedly offered to oppose Palestinian efforts in the United Nations as long as active peace talks continued. This can be understood to mean that, without active peace talks, there is no promise of a veto.As matters currently stand, a Palestinian statehood resolution is almost certain to reach the Security Council with the massive backing of the international community. If the United States does veto it, Israel’s international isolation and de-legitimization will be severely exacerbated. If Washington doesn’t use the veto but Israel opposes the resolution, Jerusalem will find itself totally isolated and at the center of a major international controversy over a U.N. decision to recognize a Palestinian state that Israel opposes.***There is one obvious alternative. Israel and the United States could begin, now, discussing ways in which U.N. creation of a Palestinian state could be leveraged by Israel to serve its larger purposes. Jerusalem and Washington could set about ensuring that the relevant Security Council resolution, along with U.S.-Israeli side agreements, reflect Israel’s strategic interests. This could conceivably be an opportunity to put Israel and the United States, and potentially the Palestinians and the Arab League as well, on the same page.Israel and the United States would ensure that U.N. recognition of a Palestinian state within the 1967 borders would also include a mandate to that state and to Israel to negotiate land swaps, security and water provisions, disposition of Israeli settlements remaining in Palestinian territory, and to work out the parameters for a Palestinian capital in East Jerusalem. The holy places in Jerusalem and elsewhere and resolution of the refugee issue would only be addressed once a Palestinian state begins functioning. But the creation of that state based on international recognition of successful Palestinian state-building would not be dependent on solving these issues.The Israeli-Palestinian conflict would then become a state-to-state issue—no longer a conflict between Israel and an elusive and problematic nonstate actor, the PLO, that represents the Palestinian diaspora. Mahmoud Abbas would negotiate with Israel as president of Palestine, not chairman of the PLO. The U.N. resolution that creates the state of Palestine would be worded to refer back to Resolution 181 of 1947, which created “Arab and Jewish states” in mandatory Palestine and to reaffirm U.N. recognition of Israel as a Jewish state.Israel could leverage its agreement and seek out significant security benefits from the United States to compensate it for the risks it would be taking. It could also bargain for incentives from the Arab League, whose Arab Peace Initiative offers Israel normalization and security in return for peace and for whom the emergence of a Palestinian state could conceivably open new channels of cooperation with Israel against Iran and the militant Islamist movements it fosters. Israel could, together with Washington, identify and neutralize any potential negative ramifications posed by international legal aspects of the emergence of a Palestinian state by dint of U.N. decree. Whatever bilateral talks Washington succeeds in convening between now and next September could be channeled toward facilitating the territorial aspects of U.N. creation of a Palestinian state.Obviously, there are also drawbacks to the approach outlined here. It would only produce a partial, not final agreement, thereby leaving aspects of the conflict to fester. While the Gaza Strip would undoubtedly be declared a part of the state of Palestine, it would remain a separate and dangerous problem. Then, too, this is a best-case scenario that could go wrong; reliance on an international track could turn into a slippery slope for Israel, wherein Jerusalem loses control over the process.Yet these dangers must be assessed not only in the context of U.N. creation of a Palestinian state but also against the backdrop of the likely alternative—the present situation. The absence of either a peace process or a Palestinian state almost certainly means an eventual return to violence. Hamas in Gaza threatens both Israel and the West Bank-based PLO whether or not a Palestinian state emerges. And Israel showed in 2005, during the Gaza withdrawal, and 2006, ending the war in Lebanon, that it is increasingly ready and able to work with the international community—but also to put on the brakes when necessary—if for no other reason than its inability to come up on its own with viable military or political strategies for dealing with the nonstate actors on its borders.The current failure of the peace process and the risks for Israel that this project represents should impel both Washington and Jerusalem to engage urgently in an analytical exercise:First, the two countries must acknowledge that the present approach for ending the conflict with a single agreement has, like its predecessors since 1993, failed.Second, they must recognize that the Palestinian/Arab League plan for international recognition of a Palestinian state, backed by universally approved achievements in state-building in the West Bank, is gaining momentum and will confront Israel and the United States with a major challenge.Third, they must acknowledge the dangers for Israel of an American veto of a Security Council resolution to recognize a Palestinian state, or, alternatively, of an American “yes” vote at the United Nations that is not coordinated with Israel on the basis of a joint effort to leverage the U.N. resolution to Israel’s advantage.And finally, they must understand that the state-recognition plan embodies risks but also potential advantages for Israel and for U.S. interests in the region, which can and should be leveraged.In short, it’s time we began talking seriously about this contingency.Yossi Alpher, who edits Bitterlemons, is a former director of the Jaffee Center for Strategic Studies at Tel Aviv University. In 2000, he served as special adviser to Prime Minister Ehud Barak during the Camp David talks.