In 2008, then-U.S. President George W. Bush advised then-Foreign Minister Tzipi Livni to run on Ehud Olmert's peace plan in the anticipated national election against Benjamin Netanyahu, according to The New Republic's latest cover story.

The story – reported by Ben Birnbaum and published by the American magazine Monday under the headline "The End of the Two-State Solution: Why the window is closing on Middle East peace" – presents a bleak picture of Israel's political trajectory.

Bush's national security adviser Ben Hadley told Birnbaum that the president thought Olmert, who was in legal trouble, would be unable to reach an agreement by the end of his term in office. But he said Bush thought Livni could win the election by adopting Olmert's plan to reach an agreement with Palestinian President Mahmoud Abbas and to campaign on the issue against Netanyahu.

"The argument [was] the same for both sides," Hadley is quoted as saying. "It's, 'Tzipi, you'll never get to the right of Netanyahu, so you might as well run to his left with something to run on.' And to Abbas, it's: 'Look, Hamas is gonna kill you. You can't be tougher on this process than Hamas, so you ought to do what actually the Palestinian people want you to do, which is to reach an agreement, and you each ought to run on that agreement, and if you do and show leadership and boldness, you'll win.'"

Bush failed to convince Livni and she did not adopt Olmert's plan in advance of the election. She had reservations about Olmert's position on dividing Jerusalem and allowing a few thousand Palestinians to return to Israel as a symbolic humanitarian gesture.

Livni even sent Abbas messages at the time, telling him not to sign Olmert's plan, Elliott Abrams, then Bush's deputy national security adviser, said. "The message was, 'Wait for me,'" he said. "Now, I think it was a historic mistake for him not to have signed, but it's not crazy for him not to have signed.'"

Olmert and Abbas met 36 times in 2008. At the crucial September meeting, Olmert recalls in the story taking out a map of his proposal for the borders of the Palestinian state and showing it to Abbas.

"'He looked at it and he said, 'This is quite serious. I have to admit, this is very serious,'" Olmert said. Then Abbas said he would have to think about it.

Olmert said he retorted, "'Don't think about it. Sign it now. I want to tell you one thing: In the next fifty years, there will be no prime minister in Israel who will propose to you something similar to this.'"

When it came to the right of return, according to Olmert, Abbas said, “I can tell you one thing: We are not aspiring to change the nature of your country.”

Olmert proposed allowing 5,000 refugees in Israel over the course of 5 years and offering compensation and resettlement to the rest. "I would've compromised a little," Olmert told Birnbaum.

Abbas signaled to then-U.S. Secretary of State Condoleezza Rice he might have accepted a number between 40,000 and 60,000, the story cites highly knowledgeable sources as saying.

"Our reading was that there was a deal to be done on [the refugee issue]," Hadely said.

Although differences remained on all the key issues, the gaps seemed surmountable, according to the story. It goes on to discuss the possible implications of Abbas' retirement.

The head of the Palestinian negotiating team Saeb Erekat told Birnbaum of Abbas and Palestinian Authority Prime Minister Salam Fayyad: "This is a dream team! Do you think Palestinians will agree to another leadership like this in the next six hundred years?"

Habayit Hayehudi chairman MK Naftali Bennett told Bimbaum of Abbas: "The new claim in town is, 'If you don't do it, he's gonna go.' So if he goes, he goes. Someone else will replace him. The graveyards are filled with people who had no replacement."

If Abbas leaves, Birnbaum speculates he is likely to be replaced by Hamas.

Birnbaun, who visited the Gaza Strip when he was preparing the report, interviewed a number of top Hamas people who expressed strong opposition to peace with Israel and the two-state solution. Ahmad Yousef, a former adviser to Hamas Prime Minister Ismail Haniyeh, who is considered a moderate in Hamas, was the most strident of all.

"'I don't understand how in the world people can accept that every Jew around the world who are coming from Russia or America or Europe has the right to go back to Palestine, when they've never been there, and the Palestinian who has been in Palestine, and [was] kicked out, doesn't have the right to go back,'" he said.

When Birnbaum suggests Jews were thought to need somewhere to go after the Holocaust, Yousef replies curtly, "Go to Germany. All the Jews of Europe should go back to their countries. Jews of the Arab world should go back to their towns and cities in the Arab world. We are ready to help them even, to prepare ships.'"

There are many other revelations in the report. For example, Rice said she was shocked when she heard Hamas had won the 2006 Palestinian parliamentary election.

"I was shocked because all the intelligence was telling us that Fatah was going to pull it out," she said. "I think Hamas was shocked."

Rice also said former Prime Minister Ariel Sharon had planned to carry out a withdrawal in the West Bank after disengaging from the Gaza Strip.

"I had a conversation with Sharon on his farm that he wanted to keep going after Gaza," Rice said.

Olmert told Birnbaum he had similar conversations with Sharon, saying, "There's no question."

Open gallery view George W. Bush and Tzipi Livni in 2008. Credit: GPO