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                         Waldorf-Astoria Hotel
                           New York, New York
                        Sunday, January 7, 2001

Thank you for your warm and touching welcome, and the chance to be back among so many old friends. Michael, as you end your term as Israel Policy Forum chair, you leave with our gratitude for your endless efforts for peace. On behalf of all who will benefit from the peace you seek, I thank you, sir. Jack, my close personal friend who has never asked me for anything in eight years except to work harder for peace, thank you for your inspiration.

I was moved by the words of Prime Minister Barak. I have so valued my opportunity to work with him. He is a man of great courage and conviction, whose intimate knowledge of war feeds his passionate quest for peace. I want to join him and the Israel Policy Forum in acknowledging the extraordinary contributions of Lou Perlmutter, Susan Stern, Alan Solomont, and Dwayne Andreas. We are in their debt.

I want to thank everyone in the IPF for all you have done to inspire and assist the work for peace in the Middle East. Your efforts are needed now more than ever.

These are challenging times for all who believe that a just, comprehensive peace is both right and essential for Israel's long-term security. For over three months, a tragic cycle of violence has cost hundreds of lives, shattered confidence in the peace process, and raised basic questions about the prospect of Israelis and Palestinians ever coexisting side-by-side.

During this painful period, the United States has worked to help the parties restore calm, end the bloodshed and move toward an agreement that will address the underlying causes of their conflict. Whether or not we make more progress in the next two weeks, I believe it is appropriate to reflect on some enduring lessons we have learned and how we can move toward a just, lasting and comprehensive peace.

From my first day in office in January 1993, we have worked to advance longstanding interests in the Middle East defined and pursued by Republican and Democratic Administrations alike, including an interest in Israel's security and in a just and comprehensive peace between Israelis and Palestinians.

For all the difficulties, remarkable progress has been made since 1993: agreements between Israelis and Palestinians in which both took historic steps toward mutual recognition and acceptance; a peace treaty between Israel and Jordan; and, last summer, Israel's withdrawal from Lebanon, fulfilling its part in implementing United Nations Security Council Resolution 425.

Along the way, we have learned important lessons about what works and what does not, lessons that will have to guide any effort, now or in the future, to reach a comprehensive peace in the region: First, that the Arab-Israeli conflict is not simply a morality play, a conflict between good and evil. It is a historical conflict whose resolution requires fairness and balance, an understanding of both sides' needs, and genuine respect for their national identities and religious beliefs.

Second, that there is no place for violence and no military solution to this conflict. Negotiations offer the only path to a just and durable resolution of their differences.

Third, that there can be no peace or regional stability without a strong, secure Israel.

Keeping Israel unmistakably strong demonstrates to its adversaries the futility of war. And keeping the Israeli people secure gives them the self-confidence to make peace. That is why the United States' commitment to preserving Israel's qualitative edge must remain iron-clad.

Fourth, that discussions between the parties must be accompanied by signs of trust and partnership, for goodwill at the negotiating table cannot long survive ill intent on the ground.

The tolerance of violence and incitement of hatred in the classrooms or the media; humiliating treatment on the streets or at checkpoints -- these are far more than mere day-to-day irritants; they are real obstacles to building a genuine peace.

Fifth, that whenever Arabs and Israelis seek to resolve their remaining differences -- today or several years hence; before or after more heartbreak and bloodshed -- the fundamental issues will be the same.

The parties will face the same history, the same geography, the same demography, the same passions and hatreds and, I am convinced, the same painful but necessary compromises that are required for a comprehensive peace. This is not a problem time will take care of -- only difficult decisions to build a different future can do that.

The cycle of violence that has broken out between Israelis and Palestinians has led many to question these lessons, indeed to doubt not only the value of the peace process but the possibility of peace itself.

What Palestinians see as a struggle for their land, Israelis experience as gun-fire and terror. What Israelis see as a firm response to violent provocations, Palestinians view as disproportionate force. And so, many now question whether negotiations, even agreements, can produce peace or security . . . whether unilateral steps are not a more realistic route than mutually agreed ones . . . whether Israelis and Palestinians can ever again be partners.

What we have seen over the past three months is not the future for which Yitzakh Rabin gave his life, not the future I had in mind when I spoke to the Palestinian people in Gaza two years ago.

But we must not draw the wrong lessons from this tragic chapter. The violence does not demonstrate that the quest for peace has gone too far or too fast -- but that it has not gone far or fast enough. It points not to the failure of negotiations -- but to the futility of violence and force. It shows that unilateral steps do not abate mutual hostility -- but exacerbate it. And, finally, it confirms the need to prepare the public for the requirements of peace -- not to condition them for the so-called glory of war.

For both Israelis and Palestinians, the first priority must be to end the dangerous cycle of violence. But they must go further to resolve their underlying problems. On the Palestinian side, what is required is an end to the culture of violence and incitement that, since Oslo, has continued unchecked. Young children are educated to believe in confrontation with Israel; and multiple militia-like groups carry and use weapons with impunity. Voices of reason and courageous leadership are being drowned out by voices of revenge and desperation that produce only bloodshed and death.

Such conduct is inconsistent with the notion that the Palestinian people want to achieve peace and have made it their strategic choice. In what they do and say, they are sending a message to the Israeli people. It can be a message of hatred or a message of hope.

For their part, the Israeli people must understand that expanding the settlement enterprise and building bypass roads in the heart of what one day inevitably will be a Palestinian state is inconsistent with the notion that both sides must negotiate a historic compromise rather than preempt it by creating facts on the ground. And they also must understand that restoring confidence requires the Palestinians being able to lead a normal existence, rather than being subjected to daily reminders that they lack freedom and basic control over their lives.

The fundamental question remains: can two people who have gone through this kind of violence still conclude a genuine and lasting peace? I believe with all my heart -- not only that they can, but that they must. The alternative to peace is being played out before our very eyes; the only consequence of further delay will be greater loss in blood and tears.

Amidst the agony, there are signs of hope. Camp David was a transformative event in which the two sides faced the core issues of their dispute and the key tradeoffs required to end it.

Though they have not been able to reach a final settlement, I am convinced that, just as Oslo forced Israelis and Palestinians to come to terms with each other's existence, the discussions of the past six months is forcing them to come to terms with each other's needs and with the contours of the peace that, ultimately, they will have to reach. It may take some time; it certainly will require strong leadership.

Prime Minister Barak has moved, with vision and courage, towards peace, without losing sight of the need to protect Israel's security and vital interests.

Which brings me to where we stand today, and where we go from here. Given the exhaustion of the interim phase that began with Oslo, the impasse reached by Israelis and Palestinians, and the tragic deterioration on the ground, both sides asked me to present my ideas.

Two weeks ago, I put forward parameters to guide further work toward a comprehensive agreement, parameters based on eight years of listening carefully to both sides and hearing them describe, with increasing clarity, their respective grievances and needs.

Both Prime Minister Barak and Chairman Arafat have now accepted these parameters as a basis for further efforts, though both have expressed some reservations. At their request, I am using my remaining time in office to narrow the differences between the parties to the greatest degree possible.

The parameters I put forward contemplate a settlement that responds to each side's essential needs, if not to their utmost desires -- a settlement based on sovereign homelands, security, peace and dignity for both Israelis and Palestinians.

The parameters do not seek to answer every question; rather, they seek to narrow the questions that must be answered.

First, I believe there can be no genuine resolution to this conflict without a sovereign and viable Palestinian state. At the same time, any solution will have to accommodate demographic realities and Israel's security requirements.

And so, my parameters suggest Palestinian sovereignty over all of Gaza and the vast majority of the West Bank with the incorporation into Israel of settlement blocs. The goal should be to maximize the number of settlers in Israel while minimizing the land annexed, for Palestine should be a viable, geographically contiguous state. This annexed land should include as few Palestinians as possible, for how can Israel explain the incorporation of large numbers of Palestinians when the very logic of peace is two separate homelands? And there should be territorial swaps and other arrangements for Palestine, for that is the only way to make an agreement durable.

Second, a solution will have to be found for the Palestinian refugees who have suffered a great deal -- a solution that allows them to return to their homeland and gives them the tools to lead normal, productive and healthy lives. And so, my parameters focus on the establishment of a Palestinian state that will provide all Palestinians with a place they can safely and proudly call home.

All those Palestinian refugees who wish to live in this homeland should have that right.

All others deserve help in finding new homes -- whether in their current locations or in third countries, including Israel, consistent with those countries' sovereign decisions. And all refugees should receive compensation from the international community for their losses and assistance in building their new lives. It makes no sense to both create a Palestinian state and have large numbers of Palestinian refugees return to Israel, thereby threatening the foundations of the State of Israel and undermining the logic of peace.

Third, there will be no peace so long as the Israeli people do not enjoy lasting security and any agreement will have to include arrangements that address these legitimate concerns. These need not and should not come at the expense of Palestinian sovereignty or interfere with Palestine's territorial integrity. And so, my parameters rely on an international presence in Palestine to provide border security along the Jordan Valley as well as to monitor implementation of the final agreement by both sides.

They rely, too, on a non-militarized Palestine, a phased Israeli withdrawal to address its security needs in the Jordan Valley, and other essential arrangements that will ensure Israel's ability to defend itself.

Fourth, I come to the issue of Jerusalem, perhaps the most emotional and sensitive of all. It is a historic, cultural and political center for both Israelis and Palestinians, a unique city sacred to all three monotheistic religions. And so, my parameters flow from four fair and logical propositions.

First, Jerusalem must be an open and undivided city, with assured freedom of access and worship for all. It would encompass the internationally recognized capitals of two states -- Israel and Palestine. Second, what is Arab should be Palestinian, for why should Israel want to govern in perpetuity the lives of hundreds of thousands of Palestinians? Third, what is Jewish should be Israeli, giving rise to a Jewish Jerusalem that is larger and more vibrant than any seen in history. And fourth, that what is holy to both requires special care to meet the needs of all, for no peace agreement will last if not premised on mutual respect for the religious beliefs and holy shrines of Jews, Moslems and Christians. I have offered formulations on the Haram el-Sharif and the holy area -- which for two thousand years has been the focus of Jewish yearning -- that, I believe, address the concerns of both sides.

Fifth and finally, any agreement will have to mark the decision to end the conflict for neither side can afford to make painful compromises only to be subjected to further demands. This really will have to be the end of the struggle that has pitted Palestinians and Israelis against each other for far too long. And this end of conflict must manifest itself with concrete acts that demonstrate a new attitude, a new approach -- by Israelis and Palestinians towards each other, by other states in the region towards Israel, and by the entire region toward Palestine, helping it get off to a good start.

The parties' experience with the interim accords has not always been a happy one. Too many deadlines have been missed, too many commitments unfulfilled -- on both sides.

So for this to signify a real end of the conflict, there will need to be effective mechanisms that provide guarantees on implementation.

This, I believe, is the outline of a fair agreement. It will entail real pain and sacrifices for both sides; but the benefits of agreement far outweigh them: For the people of Israel, an end to the conflict, secure and defensible borders, the incorporation of most of the settlers into Israel, and the Jewish capital of Yerushalayim, recognized by all.

For the Palestinian people, the freedom to determine their future on their own land, a new life of hope for all the refugees, an independent and sovereign state with al-Quds as its capital, recognized by all. And for America, the pride to see our flag finally flying over our new embassies in Yerushalayim and in al-Quds.

Of course, each side will try to do better; but a peace that will be viewed as imposed by one party upon the other, a peace that puts one side up and the other one down rather than both ahead, contains the seeds of its own destruction. And let me also say: those who believe that my ideas can be altered to one party's exclusive benefit are mistaken. To press for more surely would produce less. There can be no peace without compromise. Sooner or later, I am sure, this fundamental truth will be recognized.

Both Israelis and Palestinians are unlikely to agree with everything I have said. But I say it out of a profound commitment to Israel, to the Palestinian people, and to the peace process in which they have been engaged. My ties to Israel, like America's, run deep. They are rooted in history, founded on common interests, sustained by shared values.

During my tenure, I sought to expand our already unique military relationship with Israel and my determination to protect and strengthen Israel's safety is unyielding.

As for the Palestinian people, I am proud to have been the first President to visit Gaza and I will never forget what it taught me about their suffering, but also their resilience and courage. I said at the time that the Palestinian people should be able to determine their own future on their own land and I believe that as strongly now as I did then.

Before closing, I would like to address some final thoughts to both sides. To the Palestinian people, I know how angry and bitter you are at the death and injury of so many loved ones. And I know how hard you have fought to realize your hopes.

But courage is not only, or even mainly, measured in struggle. It is measured in the ability to recognize and to seize historic opportunities. Today, it is that other form of courage that is being tested. Never have you been as close to achieving your goals -- regaining your land, establishing a state, building a prosperous future for your children.

There will always be those sitting comfortably on the outside urging you to hold out for the impossible more. But they are not the ones whose refugees will continue to languish in crowded camps. You are. They are not the ones whose children will grow up in poverty. You are. They are not the ones who will pay the price of missing a historic opportunity. You are. Now is the time to seize this opportunity. At Oslo, your leaders -- and principally Chairman Arafat -- demonstrated the courage needed to take the first historic step. They need to summon that same courage to take the final one. For you. For your children. For the wellbeing and pride of Palestine.

To the citizens of Israel, you who have returned to your ancient homeland after two thousand years of exile; you whose hopes and dreams almost vanished in the ashes of the crematoria; you who have hardly had one day of peace and quiet since before your state was created, I know that just at the moment when peace seemed within reach, many of you have come to doubt whether it is possible. The fact is this: Your dream of a homeland has come true but you returned home to find that is was not vacant. You discovered that your land is also their land, the homeland of two peoples. And the hard reality is that there is no choice but for you to divide this land into two states for two people.

Whether it happens today or only after more bloodshed, it will happen. Today, you are closer than ever to ending a one hundred year long era of struggle. This could be Israel's finest hour. Do not give up the hope for peace.

What I have described is not an expression of a new U.S. policy, nor will it oblige the next Administration. These parameters originated with me, and will go with me when I leave office. Meanwhile, at the request of both parties, I have done and will continue to do my best to move the parties away from violence and closer to peace. We are working with the parties and with Egypt at this very moment to try to end the violence. And I am sending Dennis Ross to the region this week to consult with the two leaders.

I believe that the parameters I outlined will serve as the basis for the solution that will come, whenever it comes. I believe Israelis and Palestinians finally will achieve the peace they so richly deserve -- redeeming the sacrifice of Yitzhak Rabin and the hopes and dreams of generations. This is America's goal. This is our obligation. This must be their future.