President George W. Bush and Prime Minister Ariel Sharon have finally gotten their wish: Yasir Arafat, their long-time nemesis, has passed from the scene. In their minds, Arafat’s death brings exciting new possibilities for U.S. and Israeli policy gains in the Middle East peace process. They believe that the new Palestinian leaders—the more moderate Mahmoud Abbas and Ahmed Qurei—will be more compliant and malleable than Arafat.

The president and prime minister are certainly right about that. But the problem is that Abbas and Qurei have no support among the increasingly angry young men of Palestine and have little control over their more violent actions. Conflict is likely between the militants in Hamas, Palestinian Islamic Jihad, and the Al Aksa Martyrs Brigade and the more moderate faction of the two new Palestinian leaders because they are rivals for influence in the Palestinian movement and have differing views about policy toward Israel. Recently, in a demonstration of the perilous position of Abbas and Qurei, Palestinian radicals fired gunshots in the vicinity of Abbas.

In other words, Bush and Sharon will have difficulty negotiating with a chaotic Palestinian movement in a post-Arafat struggle for succession. In that struggle, no one—and certainly not those two mundane bureaucrats—has the stature of Arafat. Furthermore, to gain the title of undisputed leader of the Palestinian people, any contestants will have to pander to the Palestinian street by showing how tough they’ll be toward Israel.

For the short-term, these realities actually make the prospects for genuine Middle East peace even more dismal than when Arafat was alive. Any U.S.-brokered Israeli settlement reached with Abbas and Qurei would lack widespread legitimacy among Palestinians and would thus be only a paper agreement. And if turmoil or civil war among Palestinians ensues, Bush and Sharon may have nostalgia for the days when Arafat ruled.

Since at this time, neither Israeli nor Palestinian behavior indicates a desire for peace, the United States should quit banging its head against the wall in an attempt to force the reluctant parties together. Unfortunately, the two sides will probably have to exhaust themselves in conflict before they are willing to negotiate a compromise peace in good faith. Thus, President Bush should readopt the lower profile toward the dispute that he took at the beginning of his first term. When the parties are genuinely ready to make peace the United States could mediate the outcome. But unlike the Camp David Peace Accords, signed in 1978, the United States should not pay both sides to do something that is clearly in both of their best interests.

The almost $3 billion a year in aid that the United States already gives Israel (about 3 percent of the Israeli GDP) actually undermines the peace process by underwriting Israeli military power, which Sharon uses aggressively to thwart settlement of the conflict. Arguments that Israel’s existence will be endangered if U.S. military aid is eliminated are specious. Israel has 200 nuclear weapons that ultimately guarantee its security vis-a-vis neighboring Arab countries, none of which are nuclear powers. Furthermore, Israel is at peace with Egypt—its largest and most dangerous neighbor. The hostile Saddam Hussein regime has been removed in Iraq. Syria, Israel’s sole remaining hostile neighbor, has an economy less than one-fifth the size of Israel’s and has not been able to significantly modernize its military after the demise of its Soviet benefactor.

Historically, Israeli security has not necessarily been correlated with the amount of U.S. military aid it receives. From 1949 until 1970, a period that included Israel’s smashing simultaneous 1967 victory over multiple Arab militaries, U.S. military aid was either nonexistent or small. Only in 1971 and thereafter did U.S. military aid increase 20 fold and beyond. After the quantum increase in U.S. military assistance, however, Israeli military performance actually deteriorated in the 1973 and 1982 Middle East wars. So foreign military aid creates dependence in the recipient country and may make its military more slothful and inefficient.

The same is true of economic aid. In 2004, the United States pumped an estimated half billion dollars into the already wealthy Israeli economy. This money provides a cushion, allowing that state-centric economy to avoid privatization and marketization that could dramatically increase economic growth. If Israel solved the Palestinian conflict and made economic reforms—which would be encouraged by ending U.S. military and economic aid, respectively—quantum increases in foreign investment and Israeli and Palestinian prosperity would likely result.

The United States should not force the two recalcitrant parties to the negotiating table but could encourage peace between them by changing its own policies toward Middle East.