The first is a poster from the campaigning group Visualising Palestine that shows a photoshopped image of Central Park, eerily naked. Amid New York’s skyscrapers, the park has been sheared of its trees by bulldozers. A caption reveals that since the occupation began in 1967, Israel has uprooted 800,000 olive trees belonging to Palestinians, enough to fill 33 Central Parks.

The second, a photograph widely published last month in Israel, is of a French diplomat lying on her back in the dirt, staring up at Israeli soldiers surrounding her, their guns pointing down towards her. Marion Castaing had been mistreated when she and a small group of fellow diplomats tried to deliver emergency aid, including tents, to Palestinian farmers whose homes had just been razed.

The demolitions were part of long-running efforts by Israel to clear Palestinians out of the Jordan Valley, the agricultural heartland of a future Palestinian state. Ms Castaing’s defiance resulted in her being quietly packed off back to Europe, as French officials sought to avoid a confrontation with Israel.

The World Bank report is a way of stating discreetly what Castaing and other diplomats hoped to highlight more directly: that Israel is gradually whittling away the foundations on which the Palestinians can build an independent economic life and a viable state.

This report follows a long line of warnings in recent years from international bodies on the dire economic situation facing Palestinians. But, significantly, the World Bank has homed in on the key battleground for an international community still harbouring the forlorn hope that the Israeli-Palestinian conflict will end in Palestinian statehood.

The report’s focus is on the nearly two-thirds of the West Bank, known as Area C, that is exclusively under Israeli control and in which Israel has implanted more than 200 settlements to grab Palestinian land and resources.

The World Bank report should be seen as a companion piece to the surprise decision of the European Union in the summer to exclude entities associated with the settlements from EU funding.

Both in turn reflect mounting frustration in European capitals and elsewhere at Israeli intransigence and seeming US impotence. Europeans, in particular, are exasperated at their continuing role effectively subsidising through aid an Israeli occupation with no end in sight.

With Israel and the Palestinians forced back to the negotiating table since July, and after the US secretary of state, John Kerry, warned that this was the “last chance” for a deal, the international community is desperate to exercise whatever small leverage it has on Israel and the US to secure a Palestinian state.

The World Bank’s concern about Area C is justified. This is the location of almost all the resources a Palestinian state will need to exploit: undeveloped land for future construction; arable land and water springs to grow crops; quarries to mine stone and the Dead Sea to extract minerals; and archaeological sites to attract tourism.

With access to these resources, the Palestinian Authority could generate an extra income of $3.4 billion a year, increasing its GDP by a third, reducing a ballooning deficit, cutting unemployment rates that have reached 23 per cent, easing poverty and food insecurity and helping the fledgling state break free of aid dependency. But none of this can be achieved while Israel maintains its chokehold on Area C in violation of the 1993 Oslo accords.

Israel has entrenched its rule in Area C precisely because of its wealth of natural resources. Israel neither wants the Palestinians to gain the assets with which to build a state nor intends to lose the many material benefits it has accrued for itself and the settler population in Area C.

It is its treatment of Area C that gives the lie to Israeli prime minister Benjamin Netanyahu’s claim that he has been pursuing “economic peace” with the Palestinians in lieu of progress on the diplomatic front. Rather, the Palestinian description of Israeli policy as “economic warfare” is much nearer the mark. During the Oslo period, the disparity between Israel’s per capita GDP and that of the Palestinians has doubled, to $30,000. And the World Bank says that the Palestinian economy is rapidly shrinking: the 11 per cent growth that Netanyahu took credit for in 2011 has crashed to 1.9 per cent in the first six months of this year. In the West Bank, GDP has actually contracted, by 0.1 per cent.

Despite its resources, Area C is being starved of Palestinian funds. Investors are averse to dealing with Israeli military authorities who invariably deny them development permits and severely restrict movement. The image of the French diplomat in the dirt is one that symbolises their own likely treatment if they confront Israel in Area C. Palestinian farmers, meanwhile, cannot grow profitable crops with the miserly water rations Israel allots them from their own acquifers.

Aware of the many obstacles to developing Area C, Palestinian officials have simply neglected it, concentrating instead on the densely populated and resource-poor third of the West Bank under their full or partial control.

The hope was that this would change when Kerry announced in the run-up to the renewed talks a plan to encourage private investors to pour in $4 billion to develop the Palestinian economy. But the reality, as the report notes, is that there can be no serious investment in the economic heartland of Area C until Israel’s control ends.

In effect, the World Bank is saying that Kerry’s plan – and the role of the international community’s envoy Tony Blair, the so-called Quatet Representative – is not only misguided, it is positively delusional. The Quartet has been trying to revive the Palestinian economy to usher in the conditions for statehood; the World Bank’s view is that there can be no Palestinian state, let alone economic revival, until Israel is forced out of the territories. The international community has it all back to front.