The Hmoud family once prospered in this arid Palestinian farm village by cultivating banana and eggplant crops, earning enough to send a son abroad for medical school and to build a house with a showy staircase and a two-story window.

But drought has decimated the spring that is Auja's only agricultural water source, and fields once filled with palm trees are now empty. Village residents have been forced to find work in the greenhouses near Jewish settlements that are hooked up to Israeli water mains.

"This before you is barren land," says Mahmoud Hmoud, standing in parched field littered with plastic sheeting. "Ten years go it was blooming."

Long a hot-button in the parched Middle East, the need for a water-rights compromise here has become more acute after years of dry winters, as Palestinians struggle with what they say are insufficient quotas and Israel mulls steep tax hikes on home and garden usage. Both sides blame each other for failing to honor the 1995 interim agreement still in effect. Though potential solutions exist, little progress can be made until the peace process – stalled for nearly a year – is restarted.

Two straws, one glass of water

The dispute partly focuses on rights to a "mountain aquifer" underneath the hilltops of the Israeli-occupied West Bank. It collects rainwater, most of which then flows through subterranean rock formations across the Green Line into Israel proper.

"It's actually as if two people are drinking from the same glass of water with two straws,'" says Prof. Hillel Shuval, an environmental resource expert who helped negotiate a water compromise as part of the Geneva Initiative peace agreement, a hypothetical model put forth in 2003. "The ground water under the West Bank and Israel is a shared resource."

Palestinians and human rights groups contend that Israel takes the water for its population. Israelis consume four times as much per person as Palestinians, according to the World Bank. Meanwhile, Palestinians say they need Israeli permission to access even the water that remains within the West Bank.

"It's a systematic policy," says Nader Khateeb, who heads the Bethlehem office of environmental group Friends of the Earth Middle East. "Controlling the water means controlling the economy and development."

Amnesty report criticizes Israel

An October report by Amnesty International last month accused Israel of denying Palestinians access to local water resources while allowing neighboring settlements "virtually unlimited supplies." Amnesty accused Israel of neglecting Palestinian infrastructure development and leaving as many as 200,000 without running water. Hundreds of thousands of settlers use the same amount as 2.3 million Palestinians living in the West Bank, the report alleged.

Professor Shuval rejected Amnesty's claims of neglect by Israel of Palestinian infrastructure. He noted that when Israel captured the West Bank and Gaza in 1967, practically no Palestinian villages had a central water supply. He did say, however, that Israelis had developed their own water access in the area of the Jordan Valley, a practice Mr. Shuval acknowledged is illegal under international law.

David Elhiini, the head of the council of Israeli settlements in the region of Auja, said that the lack of infrastructure is in fact the fault of Palestinians – not Israel. Auja's farmers have no access to water, he said, because the Palestinians haven't invested enough in water transmission and pumping infrastructure. In other areas of the Jordan Valley, including the neighboring Jericho, farmers have enough water for their crops.

"It's not our problem," he says. "It's very easy to blame it on us."

Israel counters criticism of its practices by pointing out that it supplies Palestinians with double the amount that it committed to provide under the 1995 interim peace agreement. Meanwhile, Israeli water experts accuse Palestinians of digging hundreds of illegal wells in breach of the accord, which said a final quota would be settled in permanent peace talks.

Auja once Palestine's 'fruit basket'

Auja village council member Salah Freijad said that Auja was nicknamed the "fruit basket" of Palestine because a spring flowing year-round provided more than enough irrigation for produce.

Only a few dozen of about 8,150 acres are now being used for agriculture in the village. In addition to the drought, Freijad accused Israel of drying up the stream by drilling its own wells to divert water to local settlements. He added that the Palestinian Authority has diverted some of the water as well.

The dried-up stream has devastated the town. Children are being taken out of school and sent to nearby settlements to earn money. Some farmers have been forced to sell off land to survive. "This village can be declared dead," says Mr. Freijad.

Israel is grappling with a water crisis of its own, though not as acute.

With the country's main freshwater water reservoir, the Sea of Galilee, 4.2 feet below its lowest "red line" (which indicates water is being consumed faster than it is replenished) public service announcements remind radio and television audiences that "we haven't got any water to waste." Over the summer, the government levied a tax multiplying water bills for private users, stirring public outrage.

Spokespersons from the Israeli public water utility, Mekorot, and the government's water authority didn't return calls for comment.

Shuval: Not a zero-sum game

Though many have said that cross-border water disputes are a potential causus belli in the Middle East, Shuval says that the water dispute between Israelis and the Palestinians isn't necessarily a zero-sum game.

With new desalination plants purifying sea water for residential and industrial usage, Israel has enough water to double or triple the Palestinian water quota – though it would require an investment of $50 million to $100 million a year. But in order for that to happen, the sides would have to overcome a nearly year-long freeze in peace talks and reach an elusive final settlement, he said.

"The tragic situation is that the Palestinians are short of water," Shuval says, "and the only way for them to get more water is to reach a peace agreement in which Israel will increase the Palestinian water resources."