On the eve of the Gulf War in 1991, before Madrid and before Oslo, before Sharon and before Netanyahu, I was in Palestine on a visit, and while there had occasion to exchange views on “the problem” with a progressive Israeli friend of mine. (There aren’t too many of these follows floating around these days, but you meet the odd one every now and again.)

He told me the story, a quintessentially Yiddish story, of a Jewish peddler who sold pretzels outside a large bank in downtown Tel Aviv, often blocking the free flow of customers through the main door. When challenged by bank officers to move on, he retorted: “Look, so long as 1 don’t give out loans to customers and you don’t sell pretzels, then we have nothing to worry about.”

The story was so captivating, and so telling in its symbolism, that I hesitated at the time to question my friend about it, lest it be revealed as apocryphal, which clearly it was.

The moral of the story? Israeli chutzpah versus American indecision.

The American president can push, nudge and plead with Israel to move on till his eyeballs pop out, but so long as it can convince Washington that it is not, at a seminal level, harming American interests in the region, then the US has nothing to worry about. Israel should have a free hand in going about its business of dictating the destiny of Palestine and the future of its native people.

Look at it this way: Ariel Sharon has made it clear, from day one, that he does not accept the principle upon which any conceivable settlement must rest, namely Israel’s evacuation of the land it conquered in the June War so that a viable state can emerge there.

He also set out, again from day one, to resurrect the notion of “Greater Israel,” an Israel in charge of the whole of historic Palestine, with Palestinians relegated to little statelets under its control, a vision that had inspired various Likud governments in the 1970s, the 1980s and again beginning in 2001.

Last Sunday, the Likud’s policymaking central committee voted for a resolution saying there should never be a Palestinian state “west of the River Jordan,” thereby complicating future negotiations with Arabs and defying the Bush administration, which has made support for the eventual creation of a Palestinian state a centerpiece of its policy in the Middle East.

Likud is expected to be Israel’s most powerful party for the foreseeable future. And should Sharon be displaced as prime minister, either at the end of his term in the fall of 2003 or earlier, it is expected that the insufferably fanatic Benyamin Netanyahu, whose poll ratings are high, will replace him.

Only in Dante’s hell could a more nightmarish scenario be conjured up.

Even were all this to be pre-empted, say through American mediation, intervention or pressure (hey, a man can dream), still the gap between Palestinians and the Israeli entity remains unbridgeable. And clearly the US has shown itself to be, well, irrelevant. Since half-heartedly announcing plans for a “peace conference” next summer, the Bush administration hastened to explain that the conference will not be a conference, but a meeting, of ministers to talk about what to talk about, not to make a deal. For let’s face it, Washington doesn’t give two-pence about Palestine. Its primary concern remains toppling Saddam Hussein of Iraq, with the Arab-Israeli conflict a means to that end.

As far as the Palestinians are concerned, they are now a people who have nothing and nothing to lose. For their current uprising against foreign occupation to come to an end, they clearly need to be able to expect — not just hope — that this occupation will come to an end too.

The Palestinian uprising did not emerge in a vacuum. It erupted spontaneously after seven long years of tortuous “negotiations” during which Israel continued its land-grab policy of building Jewish outposts in the heart of heavily populated Palestinian areas. By the time PA representatives were ready to attend the Camp David summit in the summer of 2000, they controlled a mere 18 percent of the West Bank and 75 percent of Gaza. They fronted up at the presidential retreat with the understanding that they had already conceded 78 percent of their ancestral patrimony to Israel in 1948, and were not about to haggle over what little of it remained.

After the collapse of the summit, the shout-a-ramas in the op-ed pages of the American press focused on how Ehud Barak, then Israel’s prime minister, courageously “offered” — trust me on this one, that was the word often used then — the Palestinians a great package. Those commentators given to platitudes dubbed it a case of “Barak offering Arafat the moon.” In reality the Palestinians were half-offered a state, or offered half a state, neither contiguous, independent, nor wholly viable.

To be sure, it was not till December 2000, six months after the collapse of Camp David, as the American president was on his way out, when Clinton came out with his own set of proposals, and the informal talks held at Taba, in Egypt, in January 2001, that Palestinian and Israeli negotiators got closer to an agreement on borders, settlements and refugees. Those understandings, however, were held hostage to the next Israeli government, now headed by Sharon.

The rest, as they say, is history. Water under the bridge, as it were.

Not only did Sharon, once he became prime minister, scuttle those understandings at Taba, he thundered on with his campaign to reconquer the West Bank and commit unimaginable atrocities there that Palestinians and other Arabs will never, ever forgive or forget.

Think what you will of the Palestinian bombers’ tactic — it has worked as the ultimate tactic of terror. As David Remnick put it in the New Yorker magazine on May 6: “Israelis go about their lives, but at the same time they are, in the profoundest sense, terrified.” Terror, you see, works both ways.

Today in Palestine we are, alas, at a dead end, with occupation engendering resistance, which engenders repression, which in turn engenders more resistance.

Todd Purdum, the New York Times diplomatic correspondent in Washington wrote last Sunday: “Prime Minister Sharon of Israel talks of a whole new period of incremental security arrangements before a final peace settlement, meaning true Palestinian statehood might have to wait 15 or 20 years.”

So mark you calendar.

Meanwhile that darn peddler is not only selling pretzels but brazenly giving out loans on the side, as bank officials watch on helplessly. Chutzpah, you see, always wins over indecision.