The Palestinian Authority’s most notable advocate of reform threatened to quit in protest over his government’s continued failure to increase transparency and crack down on rampant corruption, according to multiple sources close to the PA.

Salam Fayyad, the PA’s prime minister, shocked observers when he arrived at the Palestinian Liberation Organization’s (PLO) offices Wednesday to propose the formation of a new government that excludes him.

The unprecedented move has exposed the deepening fault lines between Fayyad and PA President Mahmoud Abbas, a notoriously corrupt politician whose efforts to establish an independent Palestinian state outside of the peace process with Israel has brought his government to the verge of economic collapse.

Fayyad’s growing desire to quit his post also highlights a critical failure in the Obama administration’s Middle East policies, experts said.

"This administration has thrown [Fayyad] under the bus," Jonathan Schanzer, vice president for research at the Foundation for the Defense of Democracies, told the Free Beacon. "He has zero support from this administration. They’ve pushed Fayyad into a corner and engage almost exclusively with Abbas."

The Obama administration’s refusal to engage with Fayyad has only complicated recent problems on the ground, other sources said.

"The story is that" the United States consulate in East Jerusalem "has made a choice to work with Abbas and to freeze out Fayyad. That has led to the weakening of the Fayyad transparency program," said one former Bush administration official who has been in contact with sources on the ground.

Fayyad has received almost no support from the U.S. during the past four years, the official said.

Fayyad has been long hailed as a fiscal reformer by international observers. Having scant political support, however, his efforts to legitimize the PA have led to backroom conflicts with Abbas and other senior Palestinian politicians who have long profited on the backs of their countrymen.

"The bottom line is he wants to quit," said Schanzer. "He’s a frustrated guy. He’s at odds with Abbas [and] looking for a way out."

Fayyad proposed Wednesday that members of Fatah, the PLO’s largest political faction, form the "backbone" of a new Palestinian government, sources said.

His proposal represents an effort to bring the PA and its governing coalition closer to democracy, insiders explained.

However, it is also a puzzling and unpredictable development.

Fatah was behind a series of anti-Fayyad protests that gripped the Palestinian territories in September. Protesters accused Fayyad of being responsible for an ongoing financial crisis that has prevented the PA from paying many government salaries.

Insiders view Fayyad’s proposal as a means for him to absolve himself of a political catastrophe that has spun out of control and prevented him from pursuing much-need reforms.

"At a meeting of the PLO Executive Committee a couple of days ago, he basically told them that they either fully support him and his government, or he will resign and they can form a government of their own—they can stop using him as a scapegoat and take political responsibility for decisions they support," one Washington-based analyst with knowledge of the situation told the Free Beacon."He himself has been silent about the whole thing."

The PLO has not yet responded to Fayyad’s proposal, a sign that senior officials could be giving it serious consideration.

Abbas, however, is not likely to let Fayyad leave, others said.

The PA needs Fayyad because he gives the government an air of legitimacy that is attractive to international donors including the United States, which has provided the government with billions in aid.

"This was almost a cry for help," explained FDD’s Schanzer. "This is not a guy with any real political allies in the PA or internationally. He’s been marginalized and the irony is that the PA needs him" for legitimacy.

Tensions between Abbas and Fayyad first came into public view in 2011 when Abbas spearheaded an effort to establish independent statehood via the United Nations.

Fayyad was against the U.N. campaign, which ended in failure and led Western governments to fiscally penalize the PA.

Abbas has pledged in recent months to renew his efforts at the U.N., which could result in further penalties and complicate Fayyad’s efforts to keep the government solvent.

"Fayyad has long said that the U.N. push is unwise," said one former U.S. official with knowledge of the situation. "He is responsible for paying the bills and making the payroll, and he knows that the PLO push at the U.N. may result in a cut in U.S. and Israeli funds—and he also knows that no big Arab donor has stepped forward to fill the gap."

Abbas and Fayyad were scheduled to discuss the matter privately late Wednesday, sources said.

"There have been ongoing conversations between him and Abbas," said the Washington analyst with knowledge of the negotiations. "What is not clear to me are the exact terms of the conversation, specifically what Fayyad is asking in terms of support from Abbas and the factions."

Fayyad is demanding "a cessation of the attacks" on his reputation, according to some on the inside.

However, "others say that he is asking for a reversal of some of the decisions that were at the root of the financial crisis," explained the source.

Others speculated that Fayyad wants the ability to govern unimpeded.

"Fayyad believes that the corruption within the PA should be combatted and that there should be a bottom-up process of building the Palestinian state," said one Arab affairs analyst who would only speak on background. "Not an empty declaration, but actually building institutions, holding elections, and avoiding a major financial crisis."

One GOP foreign policy observer slammed the White House for its failure to back Fayyad.

"I don’t think the American people fully appreciate the significance of Barack Obama’s foreign policy failures, especially in the Middle East," the source said. "The Qataris are walking hundreds of millions of dollars into Gaza to bolster Hamas, the glorified alderman from East Ramallah, Mahmoud Abbas, is running around the U.N. looking for someone to believe the ward he controls deserves statehood, and the Fayyad is more marginalized inside the Palestinian Authority than ever."

"From a strategic view," the source added, "Israel’s security situation is worse today than it’s been in more than 25 years."