It was early afternoon and still uncomfortably hot when the convoy rolled up, sirens wailing, outside the town hall. Machine-gun toting Palestinian policemen in blue mottled camouflage gear surrounded a white four-wheel drive as the VIP stepped out, his familiar features creased into a broad grin of welcome for the waiting dignitaries.

"Welcome to Hebron, Mr Blair," declared the mayor, Khaled Osaily, before they disappeared into the sand-coloured building, screened by security men as headscarved schoolgirls giggled their way past Ramadan fairy lights. The Israeli army jeeps that escorted the visitor in had hung back discreetly for the final stretch.

Large parts of the West Bank's "city of the patriarchs" were ceded to Palestinian control a decade ago when Yasser Arafat was enjoying the mixed blessings of the Oslo self-rule agreement - which left 400 hardline, armed Jewish settlers in Hebron's ancient centre.

Mr Blair, the representative of the Quartet group of Middle East peacemakers, heard a good deal about their violent provocations. "Our briefing on the problems caused by the settlers was not brief," Mr Osaily quipped afterwards.

"Mr Blair was appalled by what we told him," said Mats Lignell, spokesman for the international observers stationed here "temporarily" in 1994 after a Jewish extremist from the nearby settlement of Kiryat Arba massacred 29 Palestinians praying in the Ibrahimi Mosque.

Wednesday's visit provided a rare glimpse of the former prime minister as he goes about what some have called his "mission impossible". It might also be described as a mission invisible - his profile so uncharacteristically low he has all but disappeared, apart from a couple of bland interviews with Palestinian and Israeli media.

Khaled Amayreh, a Palestinian journalist sympathetic to the Islamist movement Hamas, is unlikely to be granted one. "I wanted to ask Mr Blair what future Muslim generations will think of him after what he did in Iraq," he fumed in vain outside the town hall. "I wanted to ask if he believes economic prosperity will bribe Palestinians to give up Jerusalem and their right of return."

Despite his low profile, Mr Blair has had to learn fast since starting work in July. The outward silence shrouds a learning curve that has been steep and shocking since the envoy began work in July.

Angry

"Blair was really astonished and angry," says the UN official who gave him a presentation on the devastating effects of Israel's "security barrier", settlements, checkpoints, and closures on the lives of Palestinians in the occupied territories. "He asked very smart questions, though I did think that someone who was prime minister for so long should already have known these facts."

Unlike his many British, western and Arab critics, the Palestinian government at least seems pleased that Mr Blair is on the case. He told Mahmoud Abbas, the president, that he faced opposition because he was too close to the Americans and Israelis. "That's the point in having you here," Abbas replied. Ordinary people are largely indifferent.

Mr Blair's pitch is that it is vital to quickly build up the capacity of the Palestinians to run their state, and boost an economy hobbled by Israeli restrictions - however difficult the political track of the peace process and whatever the outcome of the Annapolis conference Condoleezza Rice, the US secretary of state, is convening next month.

He is being careful to stick to his Quartet mandate of economic development and governance - leaving the core political issues such as settlements, Jerusalem and final borders to Ms Rice, who he believes is committed to working intensively for a peace deal. "Condi's got religion," he has told friends.

Unsurprisingly, he sees himself as a big player, impatient with lawyerly arguments about the small print and diplomatic turf wars. "We cannot separate the politics and security issues, which interact and overlap," he said in an interview with the Palestinian newspaper Al-Quds on his third visit this week.

"Blair can certainly do something useful if someone else is trying to push the political agenda forward," says Ghassan Khatib, a former Palestinian minister. "Economics and security are the two things that will make or break any Palestinian government. These are the only possible areas for progress - apart from the politics."

With memories of Downing Street fading, Mr Blair now spends about a week a month working from East Jerusalem's lovely old American Colony hotel.

Its whitewashed walls are covered with sepia-tinted pictures of the British general Sir Edmund Allenby, who defeated the Turks in Palestine 90 years ago - months after the Balfour Declaration promising a "national home" for the Jewish people set in train the events that created today's conflict.

Instead of policemen there are blue-uniformed UN guards at the door - and a steel grille. Visitors to his offices sit on a spacious roof terrace screened from view by newly-planted olive and fir saplings. A running machine has been brought in to ensure the boss can keep fit in days packed with meetings.

The sofas are ornate, gilded and appropriately Ottoman-looking. Secrets, though, may be hard to keep: the evening Mr Blair arrived I spotted Ehud Barak, the Israeli defence minister, slipping quietly out of the back door. Palestinian journalists were intrigued to see allies of the popular jailed Fatah leader Marwan Barghouti leaving after talks.

Policy advice comes from a 14-strong multinational team. A US state department official, a Spaniard loaned from the European commission, a Dutch economist and a Norwegian work alongside UN experts and a couple of FO Brits.

The British embassy organised the first visit, but now the mission is self-supporting. "He works as much for the Poles as for us," sniffed a UK diplomat. Projected first-year costs for the Jerusalem office, staff and security (including armoured cars) are around $8m (£3.9m), and met from a UN-administered trust fund.

Attention is focused on plans for a detailed Palestinian "national economic and development agenda" to be presented to an international donor conference in December. The "ownership" will be Palestinian but Mr Blair is driving it. "He knows he has to produce some quick results," says an official. "He doesn't have long to make an impact."

Japanese investment

Work is being done on linking up several existing projects. The headline concept, dear to the heart of the Israeli president, Shimon Peres, is a "secure economic zone" for the Jericho area, where there is already a Japanese-financed plan for an agribusiness park and improved export access across the (Israeli-controlled) Allenby bridge to Jordan, en route for Gulf markets.

Jericho is easy because it is small and quiet and there is no Israeli security presence in town. The downside, says Mr Khatib, is that it is simply too small to make a difference.

Salam Fayyad, the Palestinian economist appointed prime minister after the Hamas takeover of Gaza in June, had been keen to see an ambitious initiative in Nablus, the West Bank's commercial capital and largest city. But Mr Blair's view is that is too tough a nut to crack: the city is surrounded by Israeli checkpoints and there are regular raids by the Israeli army and Shin Bet security service.

His conclusion reflects intensive talks with the key Israeli players: Ehud Olmert, the prime minister; Mr Barak, and the army chief of staff. He has also met Olmert's coalition partner, the far-right Yisrael Beitenu leader Avigdor Lieberman, who opposes any concessions, wants to remove Israel's Arab citizens - and is threatening to bring the government down.

In the words of Zahi Khouri, one of several Palestinian businessmen advising Mr Blair: "He's trying to find ways to revitalise the Palestinian economy while being sensitive to the Israeli paranoia about security." That apparently also means not tackling the West Bank barrier either - at least for now.

Many Palestinians say they are not remotely surprised. "Why should Blair suddenly become bold when he was so timid when he was in power?" asks Salim Tamari, a professor at Bir Zeit university near Ramallah.

The Blair team is also pushing plans - training, financing, restructuring - to ensure the ramshackle Palestinian security forces operate more effectively. Legal and judicial reforms are needed too. The theory is that more professional troops and police will be able to tackle militant groups such as the al-Aqsa Martyrs Brigades. That done, Israel could allow goods to move freely, creating jobs, attracting investment and loosening the stranglehold of occupation.

In practice, the key question is whether Mr Barak, more hawkish than Mr Olmert, will deliver the goods that were denied to Jim Wolfensohn, Mr Blair's predecessor as the Quartet envoy, who failed because Israel would never respect the key agreement on "movement and access" negotiated by Ms Rice.

Personal chemistry

Mr Barak and Mr Blair get on well, but personal chemistry is not enough. "If the Israelis won't even move one roadblock near Nablus what hope is there that they will give us East Jerusalem and 90% of the West Bank?" shrugs a leading Abbas aide.

Crucially, Mr Blair is keeping away from the Gaza Strip, which is under international boycott and cut off from the West Bank since Hamas took over.

He has said privately that Israel and the Palestinian Authority will eventually have to talk to the Islamists. The hope is that success in the West Bank will demonstrate the achievements of the moderates and weaken Hamas - ignoring evidence, from Iraq and elsewhere, that sanctions and collective punishment do not work.

The obvious danger is that an already disastrous humanitarian situation in Gaza will continue to deteriorate (with Qassam rockets inviting Israeli retaliation at any moment); that Mr Abbas and Mr Fayyad will not have enough to show for their efforts; and that the Annapolis conference will crash in flames.

It does not seem too gloomy to predict that Mr Blair's low-profile Middle Eastern honeymoon may not have much longer to run.

"It's difficult for him to present a detailed plan because that's the point both sides will start pelting him with rotten eggs and tomatoes since neither will like what he's suggesting," says a senior Israeli official.

"He's in a terrific position as long as he's just working quietly, consulting and listening. The moment he puts something on the table is the moment his problems begin."

Rocky road to Annapolis

Annapolis, Maryland, home to the US naval academy, will be the scene of a closely watched Middle Eastern event hosted by Condoleezza Rice next month. Beyond those facts, no one knows what to expect from what has been called both a "meeting" and a "conference" on the search for peace between Israelis and Palestinians. No invitations have yet been sent, though negotiating teams from both sides have been trying to agree on a "declaration of principles" that would probably gloss over the "final status" issues of borders, Jerusalem and refugees. Saudi Arabia says it will not attend if it is going to be just another photo opportunity. Syria is unlikely to be there because there will be no talks about the Golan Heights. Hamas has warned it is a trap. And while it is not clear what will constitute success, failure could have grave consequences. The second intifada broke out after the collapse of the Camp David talks Bill Clinton convened in 2000. Saeb Erekat, the veteran Palestinian negotiator, said this week: "If Mr Olmert and Mr Abbas reach agreement on the end-game they'll be the most important people in this holy land since Jesus."

Ian Black