Israelis are congratulating themselves on the success of their Iron Dome missile shield. But across Israel these past years has fallen a different kind of iron dome, one that isolates the country rather than protects it, which shields its people from the realities of the Middle East, from Gaza and the West Bank and Lebanon and the rest of the Arab world.

The country's liberal elite fear this isolation and the soullessness it has created. How else can one account for the government minister who proposed "sending Gaza back to the Middle Ages" or the accusations against Israeli model Bar Refaeli that she was "an enemy of the people" because she merely prayed "for the welfare of the citizens on both sides" during last week's Gaza war?

As Anshel Pfeffer wrote in Haaretz last week, there are those who are "filled with horror" at the cynical tweets from Israeli soldiers on the army's official Twitter account. "Sorrow, compassion and empathy are seen as expressions of hatred for Israel." Lamenting the law that forbids Israeli reporters from entering Gaza, Gideon Levy wrote in the same paper that "Israelis should know what is done in their name" even though "they really, really don't want to know".

If Israelis have not dwelt on the Palestinian human cost of the conflict, at least the economic cost of the Gaza bombardment is becoming clear: probably well over half a billion dollars. An hour of flying time for a pilotless Israeli drone, it's said, comes to $1,500, for a helicopter $5,000, for a jet fighter $15,000. But that's not the point. The man who Benjamin Netanyahu hoped would not win the US presidential election has already promised Israel more cash and hardware. America still stands sentinel from across the seas.

Ideology

Until 2002, Alon Liel was a diplomat – in Turkey and South Africa – before becoming director of the Israeli foreign ministry, and he fears that Israel is systematically isolating itself. "I grew up under Abba Eban and Moshe Sharett, the generation that formulated diplomacy," he says. "The idea was that Israel should become a legitimate player in the region – there was this dream that one day we would become part of the region. We always had one Muslim country as a strategic partner. I grew up in a foreign ministry that dreamed of legitimising our stay in the region."

But now there is a different ideology, and Avigdor Lieberman, Israel's extremist – some would say crazed – foreign minister, is almost certainly helping to create it. It is based on the assumption that Israel will not solve its conflict with the Palestinians. "Lieberman came up with this idea that we are European," Liel says. "It is difficult for us to accumulate a lot of support in Western Europe, but Eastern Europe is much easier for us. Romania, Bulgaria, Greece, Cyprus are some of the countries closest to us. Lieberman is building a Balkanic country. And now the Iron Dome missile system proves to the public here that it's possible to live without neighbours."

True or false? Liel hopes that Mahmoud Abbas will win huge international support for Palestinian non-member statehood when he appeals to the UN General Assembly on 29 November, the anniversary of the UN vote to divide Palestine 65 years ago. Gloomily, the vote will also come just three days after an international team start to dig up Yasser Arafat from his grave to find out if he was murdered with polonium. But Abbas's attempt to ensure that no one can murder a future "Palestine" may have grave consequences for the Israeli right wing.

"Netanyahu is seen in Israel today as a magician," Liel says – he talks like a lecturer, for his job is now that of a professor at Tel Aviv University – "and there is appreciation for him after the Gaza ceasefire. He and Lieberman have created the impression that we can do without the Middle East and without solving the problem, but overwhelming support in the UN for Abbas can be presented as Netanyahu's first major failure on the international scene. If most of the West vote with Israel, Netanyahu will say 'we have won the moral victory because we have the democratic world on our side'. But if the Europeans, the democrats, vote for Abbas, he cannot say that." Significantly, France has already said it will vote in favour.

Amiram Goldblum, a professor of chemistry at the Hebrew University in Jerusalem, blames Ehud Barak for breaking Israel's internal opposition when he returned from Camp David in 2000 without a peace agreement with Arafat. A revealing new book by Clayton Swisher, The Truth About Camp David, contains compelling evidence that Barak was largely to blame for the collapse of the talks after he demanded that Arafat accept Israeli sovereignty over the Haram al-Sharif/Temple Mount in Jerusalem. Now Goldblum fears that an apartheid state will emerge in Israel if it annexes the West Bank.

Do they want peace?

"Things went wrong when we allowed the settlers to go into the territories in 1968," he says. "As long as we could hold on to the territory as a military occupier, it would convey the message that we were after a peace deal, that we were waiting for a phone call. But the first group of settlers went into Hebron – and the spirit of taking over the territories started in the Labour movement … This gave public backing to the 'new pioneers'." And of course, those massive colonies built on Arab land – for Jews and Jews only – now lie at the heart of the Israeli dilemma. Does the country want peace? Or does it want Greater Israel?

Goldblum still thinks there is time to turn this round, to go back to the old dream which Liel remembers. The latter takes heart from the new generation of Jewish Americans. "It will change with generations. The generation of the Holocaust is leaving us," he says.