September will constitute a crucial junction for Israeli- Palestinian relations, Shin Bet (Israel Security Agency) chief Yuval Diskin told MKs Tuesday during a regular briefing of the Knesset’s Foreign Affairs and Defense Committee.

The month “will be a boiling point,” the Shin Bet head warned, since at that time, the Palestinians intend to call on the United Nations to recognize Palestinian statehood.

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“It doesn’t mean that that is what will happen, but that is the goal that they have placed before themselves. If it happens, it will place us in a problematic situation,” Diskin explained.

To respond to that situation, Diskin asserted that “Israel needs to create a situation in which there is a border, border crossings and Border Police between us and the Palestinians, even if it is a temporary and unrecognized border.”

He warned that “if we do not take care to do so, we will find ourselves in a situation that will not allow us to make that separation.”

As September approaches, he added, Hamas’s terror infrastructure in the West Bank, and particularly in the Hebron area, is likely to step up activities targeting Israelis.

The Palestinian move to gain unilateral recognition of statehood is, according to Diskin, “a weak point for Israel, and the Palestinian Authority takes advantage of that and tries to create challenges for Israel mostly through delegitimization, legal proceedings, economic boycotts and controlled diplomatic tensions.”

He added that “this process is gaining momentum because the Palestinians have recognized gaps between Israel and the United States, and ‘export’ their struggle to the international community.”

Diskin also presented an alternate scenario in which the collapse of peace talks could lead to the collapse of the PA and the return of authority to Israel – although he recognized that this was an unlikely outcome.

In Jerusalem, Diskin said, lines between where Israeli authority ends and Palestinian authority begins are becoming increasingly blurred.

The Jerusalem perimeter “acts like a Palestinian area, in spite of the fact that its residents hold Israeli identity cards,” he said. “The level of Israel’s governance in these areas is not high. There are municipal areas of Jerusalem that are on the other side of the security fence, and there are places where the municipality has difficulty providing municipal services, turning this area into a no-man’s land.”

The security fence, he argued, had actually worsened the situation, creating what he described as “a situation in which illegal Palestinian workers flock around it.”

“There is immigration from Judea and Samaria to these areas, which are in the municipal boundaries of Jerusalem, and this has significantly increased the rates of illegal construction,” he explained.

“This is an area in which there is a high level of criminal activity, and it responds quickly to events in Gaza and Judea and Samaria.”

In contrast, Diskin told MKs that there had been a significant decline in terror activity throughout the West Bank in 2010 compared to the previous year.

He noted an increase in the number of Israeli Arabs arrested for terror activity, which jumped from 24 in 2009 to 46 in 2010. Diskin emphasized that “the phenomenon continues to be relatively limited and outside of the Arab Israeli consensus.”

He pointed out that the majority of the increase was related to a terror mobilization in Nazareth that was ideologically linked to Salafist jihadist strains in the Arab world.

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