I recently completed my first State Visit to Israel and Palestine. I did not include Gaza in the trip. Unexpectedly, I left the region with much hope for a fully sovereign Palestinian State and long-lasting peace for the peoples who inhabit that crowded land.

During my 5-day visit I met with the elder Statesman Nobel Laureate President Shimon Peres, Prime Minister Benjamin Netanyahu, Defense Minister Ehud Barak, and Speaker of the Knesset Reuven Rivlin, President Mahmud Abbas and senior advisers and ministers.

I was surprised by the state of peace and economic prosperity prevailing in Israel and the West Bank. Israelis and Palestinians alike are pleased that not one single attack has been launched from the West Bank into Israel in four years.

Visiting Tel Aviv, Jerusalem, Ramallah, Bethlehem, including walking along a "refugee" area, with the infamous concrete security wall towering above me, and shaking hands with a number of youth, I was struck by the relative calm in the area. As someone all too familiar with situations of subjugation and despair, I could sense that this is a very fragile peace. Violence will flare-up if the much promised and much delayed Palestinian State does not become a reality within the next two years. Nevertheless, at this particular point in time, Israel and Palestine (West Bank) form an oasis of tranquility in a region in turmoil.

Visiting the West Bank I envied the relative prosperity of the Palestinians and the progress being made in their State-building exercise. Palestinians in the West Bank are far ahead of most Sub-Sahara African States, and indeed well ahead of my own country, in economic well-being and the development of the State institutions.

Israelis were not bestowed with the same resources available to much of the Arab world. Yet Israelis are ahead of all their neighbors, and of many European countries, in such fields as humanities, science, food security, information technology, and medicine. They have harvested more Nobel prizes than any other individual country of its size. That this tiny country struggling with water scarcity is a major exporter of high quality agriculture goods to Europe and Russia illustrates the well-known Jewish resilience and creativity in the face of extreme adversity.

Palestinians living in the West Bank, who have been much less fortunate in life than Israelis, are yet ahead of their Arab brothers and sisters in the critical area of higher education, and serve in key positions in government, business and academia throughout the region, in the US and Europe.

In my conversations with Israeli leaders I was struck by the respect I heard for President Abu Maz and other Palestinian leaders. From the Palestinian side, in spite of decades of betrayal and suffering, I did not hear much animosity towards Israelis and Americans. In spite of obvious long-standing American bias towards Israel, the Palestinians I spoke to continue to favor US mediation.

Prime Minister Netanyahu says that he is anxious to restart face-to-face dialogue. He appears to be firmly committed to the two-State concept, to a truly independent Palestinian State, one that is economically prosperous. Yes, the settlements remain a complex issue, but it is a mistake to make them the central issue. The Israelis know that once a final settlement is achieved the settlements have to go. They did in Gaza and they are prepared to do it in West Bank with "minor border adjustments" from both sides.

As relevant an issue, in our discussion, the Israeli leader was very emphatic in opposing a Palestinian State with a full-fledged army and one with offensive military capabilities. I put this to President Abu Maz and he was quite pragmatic about it, essentially agreeing that a Palestinian State would not need an army. He in fact favors a professional police force trained by the Americans.

In the region -- or at least in Israel and Ramallah -- there is deep resentment and opposition to radical Iranian meddling in Gaza and Lebanon. For many in Israel, Palestine and elsewhere in much of the Arab world, Iran presents the greatest threat to all. I heard from many that "the Iranians have taken control of Gaza and Lebanon". There is a convergence of views in the entire region about Iran's meddling and its destabilizing effect, and yet only the US and Israel seem to be able to check Iranian's ambitions.

According to senior Palestinian leaders, Iranian intervention makes it reconciliation between the Palestinian Authority or the PLO and the Hamas extremely difficult. As long as there is no change of policies and tactics by the Hamas, the prospects of reconciliation among Palestinians will always be extremely difficult to realize, in the end undermining Palestinians' dream of a peaceful and prosperous State.

I also believe that demonizing the Hamas or Hezbollah and declaring them "terrorists" is far too simplistic and unwise. The reality is that Hamas and Hezbollah have not been involved in terrorist activities outside the region. One well-known "terrorist", Yasser Arafat, signed the now forgotten Oslo Peace Accord and was awarded the Nobel Peace Prize in 1994 along with Shimon Peres and the late Prime Minister Yitzhak Rabin. T

here should be some back-channel dialogue with Hamas and Hezbollah by the Americans and Israelis to explore a modus vivendi with them.

Dialogue even with one's declared enemies must always be the preferred option. Even more so when there is clear evidence that the other side has leaders with mass following and a political agenda.

I do not believe that Hamas and Hezbollah pursue "terror" tactics for the sake of it. For them, the end justifies the means. Their goal is Israeli withdrawal from all occupied Arab lands and Palestinian independence. The elimination of the State of Israel as stated on occasion by some fanatics are no more valid than, and are equally abhorrent as, the many derogatory and incendiary statements uttered by extremists in Israel and the US against Arabs and Muslims.

The overlapping claims on Jerusalem present probably the greatest challenge for all sides. However, there might be possibility for compromise -- even if talking about compromise on Jerusalem would amount to heresy in Israel. Factually, a compromise need not necessarily undermine either side's valid spiritual claims to Jerusalem as their capital.

Both sides should be able to hoist their flag in Jerusalem. But no side should be allowed to turn the sacred area into a city of politicians, bureaucrats, policemen and merchants.

In reality, the Holy City, like most holy places in the world, has been taken over by enterprising merchants selling religious merchandise catering to all religions. Perhaps the merchants are wiser and more pragmatic than religious scholars, preachers and politicians - they've already worked out how people of all faiths can work side by side.

There is no reason why Israelis and Palestinians should not agree to some symbolic presence in areas around inner Jerusalem, like the ceremonial palaces or offices of the two Heads of State and Prime Ministers, while keeping most government and administration offices in Tel Aviv and Ramallah. The Palestinians who also have valid claims to the city should be entitled to have a symbolic presence there, calling it its capital, while their de facto capital remains in Ramalah.