Shlomo Gazit: During the Six-Day War I was still in uniform. I was head of the intelligence research and assessment department and on June 9, literarily the day before the last day of the war, we came out with a paper, which I believe is very, very relevant not only to June 1967 but to June 2007.

In that paper, we said Israel should exploit the military developments to establish a new relationship with our Arab neighbors and the goal should be formal and comprehensive peace.

We proposed that Israel should call for a new peace agreement and not intervene in the regimes or governments of the Arab countries. We should support the establishment of an independent Palestinian state in the West Bank and Gaza Strip and allow free movement between the two parts of the Palestinian state. This Palestinian state would not be allowed to possess weapons or armed forces.

Finally, as regards Jerusalem, we said the whole city should become an open city, something similar to the Vatican.

The paper was distributed, but obviously nothing came of it at the time. My feeling today, 40 years later, is that we are very, very close to see this proposal being realized. That paper is more or less the framework of the political settlement that we are going to see established within another five to 10 years from now.

Abdel Jawad Saleh: I have to contradict Mr. Gazit. From the moment the occupation started, Israel wasted no time in starting to colonize Jerusalem and other parts of the occupied territories.

In Jerusalem, for example, and in spite of the cooperation of the then Palestinian mayor, Israel dissolved the Palestinian council of Jerusalem, annexed the East and made conditions very bad for the Palestinian population of Jerusalem.

Israel destroyed the villages of Latroun, Amwas, Yalo and Beit Nouba in the first days of occupation. From the beginning, the plan was colonization, not just occupation.

Palestinian markets were dumped with subsidized Israeli products in order to undermine Palestinian-founded industries and the economy. Taxes, collected on behalf of municipalities, were not paid out as a form of collective punishment. It was an active policy of de-institutionalization. The Palestinian Jerusalem electricity company became just an agency for collecting money, for example. Personally, I was accused by one military governor of being a Nazi because I wouldn't permit the Israeli Egged bus company to replace the Palestinian-owned Ramallah-al-Bireh bus line.

Israel was engaged in war crimes as stipulated by the Geneva Conventions from day one. Civilian Israelis were transferred to occupied territory, collective punishment was inflicted on Palestinians, homes were demolished, political and community leaders were exiled. This included people like me who advocated non-violent resistance and a two-state solution.

Why, Mr. Gazit:, and I ask you as one who participated in the decision to send me into exile for 20 years, why was such a decision taken? Was it because you as a military occupation government were not in favor of peace and therefore you had to get rid of a Palestinian leader who believed and practiced non-violence as a form of resisting the occupation?

Gazit: I am not very happy with the trend of this discussion. If we are going to start with all the grievances you have against me and I have against you--not you personally, but you the Palestinians, the Arab countries--starting with the threat that was clearly vocalized about the destruction of Israel on the eve of the Six-Day War and the feeling of the Israeli population at the time that we were going to be annihilated, it won't serve anything.

The main point is, immediately after the war, I believe it was on June 19, the Israeli government sent a clear proposal to the Arab countries, which was transmitted via the US State Department both to Cairo and Damascus. That proposal said that we were prepared to withdraw to the original armistice line if we could negotiate a formal and comprehensive peace agreement. The response of the Arab countries was the Khartoum conference a few weeks later. There Arab countries agreed to say no to peace, negotiations and recognition of Israel. That was the situation in which we were operating at the time.

There was no partner with whom to have a dialogue. Moshe Dayan, the minister of defense, was trying to have an indirect dialogue with Yasser Arafat at the time. He received a flat rejection. Yes, we were an occupying power, but there was no partner to negotiate with.

Unfortunately, and here I can agree with Dr. Jawad, the Israeli government was divided. Part of the government very quickly saw the results of the war as a message that Israel could go back to the original borders of Eretz Israel, and this initiated the settlements in certain areas. And by the way, most of the settlements started only ten years later when the Likud took over in 1977. I personally think this was a mistake.

But that isn't the point. The question is, where do we go from where we are now. And I mentioned my 1967 paper because I believe this is going to be the solution: A Palestinian state side-by-side with Israel, more or less in accordance with the green line. And yes, we cannot ignore the changes and developments that occurred in the last 40 years.

It's only a question of time and strong leadership. Unfortunately, this is the thing I don't see on either side.

Saleh: The solution you are talking about is what I believed when we established the Palestinian National Front in the occupied territories. As a member of the executive committee, I was a promoter of the idea of a two-state solution. Even after my exile I never changed my mind nor was I persuaded by the armed struggle. I was and remain a proponent of non-violent resistance.

But unfortunately, soon Palestinians will not even have a graveyard to bury our dead in. Israeli colonization has really canceled the idea of a two state-solution. It is impossible now. And, by the way, the colonization of the West Bank was proposed from the beginning of the occupation.

Gazit: The only possible solution is a two-state solution. Yes, we cannot ignore the fact that changes took place in the last 40 years. And there will have to be a certain adjustment of the borders. On the one hand, Israel will have to withdraw from a very great deal of its settlements in the West Bank. We have shown in the Gaza Strip, unilaterally and before any agreement, that this can be done, and that was not so long ago. On the other hand, there will hopefully be a certain swap of territories between Israel and the future Palestinian state.

Obviously, we can't turn back the clock to the conditions that we had in June 1967. The reality today is very different. But if you bear in mind what our goal is, what we want to achieve, this is something that we can negotiate.

Unfortunately I do not yet see these kinds of negotiations. Especially since on the Palestinian side we have an elected government that ignores the existence of Israel and refuses to negotiate or have any political dialogue. But this will come. I just don't know if it will it be within the next five months, five years or ten.

Saleh: I don't think it is helpful to try to give the impression that there is no partner for peace among Palestinians. Hamas, in fact, does implicitly recognize Israel and said as far back as 1993 that it was ready for a solution that saw the establishment of a Palestinian Islamic state on the occupied territories of 1967.

I am not Hamas. I am not a member of Hamas and I am not a supporter of Hamas. But this is a fact.

In addition, you were talking about Arafat not being a partner, but right now we have Mahmoud Abbas, who doesn't believe in any other way to bring about a solution except through negotiations. What does Israel do? It calls him weak and therefore not a partner.

I again return to my central point. Israelis are not in favor of peace. I was exiled because you were not in favor of peace, not as Mr. Gazit, but as the Israeli occupation and the Israeli government.

Gazit: Let me begin with your previous question then. You were exiled because we had the responsibility to administer a certain area, an area with a population of one million people, and we could not allow any opposition to the military government at that time. I have not seen any other military occupation in the history of the world that has allowed the occupied people free access to the non-occupied parts of the world. We tried our best to allow the local Palestinian population to live as normal a life as possible with its own leadership without imposing one single officer or quisling. But when there was opposition--political opposition, riots, demonstrations and terrorism--we had to react.

And, unfortunately, you were one of those that were opposing our administration. The role of this administration at the time was very clear. We, the military government, were not responsible for the future. We were responsible for day-to-day administration. The future was to be determined as the result of a negotiated agreement between the Israeli government and Palestinian leaders.

There are two wonderful examples where this happened. Once we had an Egyptian government that said it was ready to negotiate and wanted peace, Israel withdrew totally from the Sinai, and we had peace with Egypt. We had a similar agreement with King Hussein and Jordan. We need leadership that is prepared to negotiate and wants peace. Then everything can be resolved.

At the same time, when we are talking about the past, I have a lot of criticism of my own governments, and I think they committed many mistakes. You mentioned Arafat, and you mentioned Abu Mazen. I personally think, and an Israeli majority agrees, that we should negotiate with the Hamas government, which was legally elected in a democratic way.

Unfortunately, we did not get a clear message from Ismail Haniyeh when he was elected that he was ready to negotiate a solution with Israel. I have never heard such a statement from Haniyeh. But that isn't the point. That will come, if not today then tomorrow.

This is my point. Everything is ready, and we know more or less what will be the shape of the future agreement. We only need the right people at the helm, both on the Israeli side and the Palestinian side.

Saleh: First of all, as regards to Egypt Israel had a very clear strategy. Israel wanted to eliminate Egypt from the theater of war and that's why it was ready to abandon all Egyptian territory. The situation with Jordan is a little more complicated, indeed, not all Jordanian territory has been abandoned, rather it has been leased for 99 years.

But neither are good examples for the Palestinian-Israeli problem. Here, and I repeat again, from the very beginning Israel started colonizing the occupied territory. I never hear about this paper you mentioned earlier. From where I was standing, Israel clearly had a program of colonization that precluded peacemaking. This is why I return to my own example. I very clearly proposed a two-state solution. I very clearly opposed violence. But I was a Palestinian mayor and considered my responsibility to be to my own people. I rejected any colonization of my hometown. But I never killed anyone or accepted such actions.

Yet, I was exiled for 20 years. And it is because of what happened to me, and what happened to many others like me, as well as the colonization of our land, that I believe that Israel was never serious about a negotiated peace, that it was never serious about withdrawing from occupied Palestinian territory.

I believe that if Israel wants peace, it can have peace in 24 hours. Just withdraw from the occupied territories, take with you the settlers and postpone the question of the refugees. In 24 hours, there will be peace.

Gazit: I am very, very eager to see peace in 24 hours, but if you say postpone the question of the refugees then this is not peace. The issue of refugees is a very clear threat to the very existence of Israel as a Jewish state. And I have no intention to reach an agreement in which this very critical issue is left open. We need negotiations and an understanding that the Palestinian refugee problem has to be resolved, quickly resolved.

Israel should share the solution to the issue of refugees through financial aid but not through allowing the return of refugees. If this is not agreed up front then the present mess will continue.

A precondition for withdrawal is a full political agreement between the two parties. And this political agreement should include, perhaps as its top issue, the issue of refugees. You can't ignore it and say it is a minor issue, let's leave it open for the time being.

There are three major issues that will have to be agreed in negotiations: a solution to the refugee problem, borders, and Jerusalem and the holy sites. These are the crucial issues that will have to be negotiated, discussed and resolved. All the rest is minor.

Saleh: The refugee issue is not a minor issue. On the contrary it is extremely complicated. That is partly why I suggest postponing it. And if you put these conditions in advance, it seems to me you are not serious in wanting to make peace with the Palestinians. With regards to territory, the issue should be very clear: there can be no change to the lines of 1967.

Gazit: Why do you insist, before we even start, there should be no change to territory? We made minor changes with Jordan but we cannot do the same with the Palestinians?

You are setting preconditions by saying no change to territory. There was a mess in Latroun before 1967, and we have to go back to that? There is a village called Barta that was divided before 1967, this village will have to be re-divided? I can't understand the logic of such an attitude.

Saleh: It is simply not admissible to gain territory by force. This is a basic principle of international law. Now, after we become a state, and Israel recognizes us as a state on the 1967 borders, then we can negotiate as two equal partners about any issue.

Gazit: What do you mean become a state? How could this happen if we don't know the borders of the state? Why shouldn't we start by negotiating all the crucial issues between the two states? This was the essence of the Oslo agreement in 1993, and we started to implement it. Unfortunately that all broke down, not because of us, but because of terrorism.

But why shouldn't we restart it again and say, let us forget about the acquisition of territories, by force or not by force, all of this is not interesting. We have two parties that have to live side by side. We have to negotiate to reach an agreement, and we mustn't waste time. Let's start negotiating on the three major issues.

Saleh: Mr. Gazit, the offer to negotiate is open. Abu Mazen has made that very clear. It is Israel that is rejecting Abu Mazen's repeated proposal to hold negotiations on all these problems, whether the refugees, whether the borders, whether recognition. Israel is blocking negotiations, not the Palestinians.

Gazit: Over the last 40 years, and unfortunately it was 40 and not four, we have started a process that is leading toward a maturing of the conflict between the two parties, and thus a solution.

What has happened is extremely important. Three things happened. First, there is a clear realization on all sides that no one has the military power to annihilate the other. That was decided on the Arab side in 1973, following what we call the Yom Kippur War, since which there is a clear Arab understanding that Israel cannot be destroyed by military force.

On the Israeli side, we realized that we cannot solve the problem of Palestinian resistance by military force. We can minimize it, we can do our best to go on living in spite of Palestinian resistance or terrorist acts, but we have no solution to the problem. This is a determinant fact toward the future.

Second, Israelis have realized that there is no political solution that we can impose on the Palestinians, while all 22 Arab states have realized that they too cannot make the international community impose its will on Israel. Israel is supported by a very "tiny" country called the United States of America.

Finally, there is now an element of urgency. Both sides realize today that we don't have time to waste.

These factors have made the conditions ripe for a solution. The problem that we are suffering on both sides is that we have divided and weak leaderships that are incapable of moving ahead. I hope this is going to change in the near future.

Saleh: I wish I could believe these three lessons were learned by the Israeli government and not just Mr. Gazit. But if we look at recent history I think it is clear that Israeli governments have not learned these lessons.

For example, the Palestinian side was very serious about Oslo. I'm a witness to how Hamas and the opposition were tortured and imprisoned by the Arafat regime in order to protect that agreement. But unfortunately, after the death of Yitzhak Rabin, it was clear that it was he, but not those who succeeded him, who was ready to implement the agreement and that is why he was killed.

The third deployment stage was never implemented and the Israeli civil administration, which was to have been replaced by the Palestinian Authority, was never dissolved. Instead, it remained as a parallel authority and this really undermined the PA.

Restrictions on the movement of Palestinians, the failure to open the secure passage between Gaza and the West Bank, etc., were all caused by the settlement activities in the West Bank, the Gaza Strip and Jerusalem.

I really believe that Israel is not interested in peace. Take for example Ariel Sharon's unilateral disengagement and the adoption by Ehud Olmert of unilateralism. It is very clear that Israel is creating bantustans and ghettos for the Palestinians. You can call this a state or you can call it an empire. What it isn't is a sustainable country where Palestinians can live and prosper and therefore it will not bring peace.

It's possible to move forward only when Israelis truly come to recognize the lessons Mr. Gazit postulated.

Gazit: I suggest that Mr. Jawad read the Israeli press. Israel is a free country. Opinion polls are published almost on a daily basis, and you can see what Israeli public opinion is.

Public opinion in Israel--governments are not important, what is important in a free democratic country is public opinion--clearly shows that Israelis want a political two-state solution, and a majority is prepared to see a withdrawal from major parts of the occupied territories.

We are talking about a political process, so what is important is what people say they want. Now I hope that you will agree with me that between 1967 and 1977 and much later there was total free movement within the West Bank, between the West Bank and the Gaza Strip and between the West Bank and Israel.

I remember thousands of Palestinians coming from Ramallah, Jenin and Nablus to take a swim in Netanya and elsewhere. Something happened to stop this and what happened was terrorism. When we started facing terrorism we had to act. When we saw suicide bombers, the question became, how can we prevent them? The result is the famous fence and all the other restrictions that prevent free movement.

So you can't have it both ways. If you say you want to resist Israel by military force, by terrorist activity, then Israel will fight back. You either negotiate and reach an agreement, or you try to impose a solution by force. There is no in-between.

The situation is ripe. We are ready. And I don't mean just the Israelis. What happened in Riyadh a little while ago shows that the Arab world is eager to see a political solution.

And just one word on Jerusalem. Jerusalem is a holy city, not just to Jews and Muslims. It is holy to the whole world. It is a holy city for Jews, for Christians and for Muslims. Any solution that ignores this will never work.

And leadership is needed. A solution will only come if there is strong leadership on the Israeli side, and strong leadership capable of taking very courageous decisions on the Palestinian side.

Saleh: I am a close reader of the Israeli press and I can tell you, it's not a matter of public opinion. If it were a matter of public opinion, the US would withdraw its troops from Iraq, to give just one example.

The same thing applies in Israel. If Olmert listened to his public then there might not be a problem. But Israelis voted for Netanyahu, who opposed the peace process, and Israelis voted for Ariel Sharon who was also opposed. So please, I am a democrat, but I believe it is about leadership and not public opinion.

Israeli leaders implemented the closures and Israeli leaders decided to end the negotiations. For two years now, Abu Mazen--a man who really believes that a Palestinian state will come into being through negotiations and only through negotiations--for two years he has been asking for negotiations and for two years he has been rejected by the Israeli side.

Unfortunately I don't believe the time is ripe for a solution. The Israeli government is doing nothing to prepare the ground for such a solution. Olmert is building 20,000 apartments in colonies, so how can he be interested in peace? Just like the Netanyahu, Barak and Sharon governments before him, Olmert's government is not ready to make peace.

And this is unfortunate because we do have a very courageous leadership on the Palestinian side right now, where Abu Mazen stands ready and waiting.

Major General (ret.) Shlomo Gazit was head of IDF Intelligence Analysis and Assessment in June 1967. He was the first coordinator of Israeli government operations in the occupied territories.

Abdel Jawad Saleh is a former mayor of al-Bireh, a former member of the PLO's Executive Council and a former PA minister of agriculture.