The recent escalation of tensions in Jerusalem with clashes between Palestinian demonstrators and Israeli police in and around the Old City appear to signify the emergence of a disturbing new trend: the Hebronisation of Jerusalem. This presages not only the triumph of the radical settler groups in taking over culturally sensitive parts of the city, but also further violence and turmoil. More importantly it also interrupts the delicate moves towards the resumption of negotiations between the Israeli government and the Palestinian Authority/PLO.

Why Hebronisation? Hebron, just south of Jerusalem and Bethlehem, is a city – despite pockets of wealth – characterised by poverty, lack of investment, increasing criminality, the breakdown of municipal services and the absence of any recognised national and local leadership. Since the Israeli occupation of the West Bank, Israeli settler groups in Hebron have acted with increasing impunity in a city with an overwhelming Palestinian majority. This is largely due to restrictions imposed by the Israeli government to promote the settler presence in the heart of Hebron's Old City. The declaration last week that the Tomb of the Patriarchs (the presumed site of Abraham's burial place) located in the al-Ibrahimi mosque has been added to a list of protected Jewish sites has underlined this projection of Israeli power into the planned Palestinian state.

The acceptance of the Israeli settlement movement in Jerusalem into the Israeli political mainstream, its capture of some of the city's key institutions and geographical locations, its support from the highest echelons of the Israeli bureaucracy, judiciary and army, its funding by wealthy US and other external sources all point to a culture of impunity that suggests more than a passing resemblance to Hebron. The creation of no-go areas for Palestinians in parts of Jerusalem and the closing of market streets as a result of settler harassment has not occurred to the same extent as in Hebron, but the signs that this can happen all too easily are already discernible in areas targeted by the settlers.

A recent report published by Chatham House – Jerusalem: The Cost of Failure – argued that this Hebronisation of Jerusalem also comprised a mixture of exclusion, unilateral withdrawal from certain peripheral areas by Israel and the so-called "warehousing" of the remainder of the Palestinian residents in East Jerusalem. Current trends, it suggested, would result in the physical removal of much of the Palestinian population from the central parts of East Jerusalem.

Despite this dire scenario, the report also held that for the foreseeable future the Israeli government was in a strong enough position to contain the negative impact of these developments. The chief result has been to deprive the Palestinians of East Jerusalem of any effective and coordinated resistance to the settler activity. Consequently, in the short-to-medium term (two to five years) the Israeli government will have an almost free rein in the city to complete the Hebronisation process.

There are two caveats to this prognosis. The first is the challenge to Israeli authority in the city from the Islamic Movement, a group based in northern Israel. Its present community action, based around efforts to bring Palestinian Muslims from Israel into Jerusalem to "protect" their heritage, is just about tolerable to the Israeli government. When and if it is able to transform itself into a force that threatens Israeli hegemony in the city, more drastic action may be taken. As the movement is based within Israeli itself, it is not something that Israel can suppress in the same way as it has acted against Hamas in the occupied territories.

The second caveat is the role of the Jewish, Christian and Muslim religious sites in the area referred to as the Holy Basin. A critical issue that will provoke reaction in the streets of East Jerusalem is an Israeli infringement of the Islamic rights to the Haram al-Sharif and associated places. As seen last weekend and also in October 2009, street protests and rioting have already broken out over perceived threats to the Haram al-Sharif, partially, but not exclusively, mobilised by the Islamic movement from inside Israel. A miscalculation by the Israeli government, or the flexing of muscles by a settler group, could provoke a furious and possibly uncontrollable response.

This bleak prognosis can to some extent be avoided. By reaffirming the illegality of Israeli policy in East Jerusalem, the recommendations put forward in a recent leaked EU heads of mission report would go a long way towards halting the slide to both consolidating the Israeli presence and the further fragmentation of East Jerusalem. The recommendations include promoting the establishment of a PLO representative in East Jerusalem, the prevention of financial transactions by EU member states that support settlement activity or the export of products from settlements to the EU member states and the support of Palestinian civil society. Nevertheless, by themselves, it is unlikely that these actions would be sufficient in the time available to prevent the scenarios outlined above.

The focus of diplomatic activity should be on two key areas. First, the seriousness of the situation should be impressed upon the US and the president's special envoy to the Middle East, Senator George Mitchell (as the key actors with any leverage on the Israeli government) and the Quartet. A significant point that could be made is that until the concerns of all those living in Jerusalem are addressed, Israel's security is as much at risk as the livelihood and well-being of the Palestinians. Second, the international community needs to convince the current Israeli government that the activities of radical settlers in destabilising the status quo of the religious sites and acquiring strategic tracts of land will lead to further violence not only in Jerusalem but across the region. Israeli policies in support of returning to a negotiated peace process and support for such groups are contradictory.

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