Hamas and Fatah have been brought together by a changed regional context following the Arab spring. The immediate future may be difficult to predict, but all bets based on previous assumptions are off.
The 'grown-ups' will step forward after Fatah-Hamas deal
It is unlikely that the Israeli prime minister Benjamin Netanyahu was so out of touch with reality as to imagine that he presented President Mahmoud Abbas with a genuine dilemma when he warned that the Palestinian leader could have peace with Israel or with Hamas, but not with both.
Mr Netanyahu knows only too well that the most he is willing to offer Mr Abbas is well short of the minimum that any Palestinian leader could accept. Negotiations with Mr Netanyahu got Mr Abbas nowhere; reconciliation with Hamas answers a popular call from the Palestinian base that has been amplified by the Arab spring, and therefore strengthens his declining domestic political position. It even strengthens his hand at the negotiating table by depriving the Israelis of the argument that the Fatah-Hamas split means that Mr Abbas is unrepresentative.
But Mr Netanyahu's diplomatic strategy over the past two years has been based on the assumption that no peace agreement is possible with the Palestinians, and that the Palestinians must be blamed for the deadlock. That's why the Israeli leader believed that Mr Abbas's decision to agree to a unity government with Hamas played into his hands. After all, Washington had long endorsed Israel's insistence that it will not talk to Hamas, and actually played an active role in the economic siege and other strategies to topple the group after it won the 2006 Palestinian legislative election. Mr Netanyahu assumed that he can offer the Palestinian unity agreement as Exhibit A in his case for avoiding negotiations.
While the Israeli prime minister may get the response he desires on Capitol Hill, where moves are already afoot to cut US financial aid to the PA, the Israeli leader may have misread the international mood. Egypt, for example, has broken with the Mubarak policy of actively assisting the US-Israeli campaign against Hamas: Cairo's military leadership is normalising ties with the organisation, and plans to open Egypt's border crossing with Gaza.
Today, neither Arabs nor Europeans are likely to accept the idea that the Hamas factor absolves Israel from ending the occupation that began in 1967. The grown-ups, not only in Washington and Europe but even in the Israeli security establishment, have long recognised that Hamas represents a significant segment of Palestinian society, and a viable peace plan would require its consent.
Sure, the Hamas leader Dr Mahmoud Zahar has said that a Palestinian unity government will have no intention of negotiating with Israel, just as Israeli leaders have insisted that they won't talk to a government that includes the Islamist group. But Israeli-Palestinian political negotiations have never, in fact, involved the Palestinian Authority (PA); they have always been conducted between Israel and the Palestine Liberation Organisation (PLO), of which Mr Abbas is the chairman.
The PA was created as an interim administration to govern parts of the West Bank and Gaza pending the outcome of final-status negotiations over a Palestinian state. No such agreement has been achieved, of course, putting the status of the PA in limbo. If anything, that's likely to restore the importance of the PLO.
The PLO is not directly elected, and while it includes Fatah and minor factions, Hamas - which was formed more than two decades later - is not represented. Hamas spokesmen have indicated that the latest agreement with Fatah includes plans to restructure and democratise the PLO. But for now, the spokesman Taher al Nounou told The New York Times, that Hamas would abide by any PLO negotiations. Hamas's longstanding position has been that it has no interest in negotiating directly with Israel, but would accept a deal between Israel and the PLO - if it won approval in a Palestinian referendum.
While Mr Abbas appears to have the flexibility to negotiate, the real question for the Palestinians is whether US-mediated talks are going to achieve an end to the occupation. The fact that Mr Abbas is planning to go to the UN General Assembly in September to seek recognition of Palestinian sovereignty over all of the West Bank, Gaza and East Jerusalem suggests the that the PLO leader is reluctantly relinquishing US tutelage. That will come at a cost in lost US diplomatic and financial support for the PA, but it does put Palestinians back in control of their own destiny.
A UN vote won't end the occupation, and the Palestinians now face the challenge of forging a strategy to muster the leverage necessary to change Israel's calculations while maintaining international support. In that respect, reviving the PLO, not only to draw in Hamas but also to democratise it in the context of the wider Palestinian civil society, may be more important than sharing the reins of governance in the PA.
The track record recommends caution when predicting the survival of any Fatah-Hamas accord. And the PA's extensive security cooperation with Israel that results in hundreds of Hamas activists locked up in the West Bank will prove to be difficult to navigate - the US role in developing West Bank security forces will also come under pressure if Washington cuts aid.
Right now, both sides are saying little about how they'll manage the multiple security and political challenges posed by any rapprochement. But it's worth noting that Hamas and Fatah have been brought together by a changed regional context following the Arab spring. The immediate future may be difficult to predict, but all bets based on previous assumptions are off. And the spectacle of the Palestinians breaking out of Washington's strategic straitjacket will worry Mr Netanyahu far more than his bravado suggests.
Tony Karon is a New York-based analyst. Follow him on Twitter @Tony Karon