In many ways the Israel-Syria situation today is reminiscent of the early 1970s and the halcyon days leading up to the 1973 Yom Kippur War: There is a booming economy, an Arab leader signaling readiness to make peace, a hawkish Israeli government partially deaf to his entreaties, intelligence estimates that the probability of war with Syria is low and Israeli generals boasting that the Syrians know they don't stand a chance in a showdown with Israel and that the IDF could reach Damascus with relative impunity.It was in this 'march of folly' atmosphere that Defense Minister Ehud Barak warned in early February that 'in the absence of a peace agreement with Syria, we might find ourselves in a violent conflict that could lead to an all-out war.' Such a war, Barak argued, would achieve nothing but pointless devastation and loss of life; as soon as it was over, the parties would go straight back to the table and 'discuss the very same issues we have been discussing for the past 15 years.' In other words, why not go directly to peace talks now and avoid the ravages and suffering of war?In issuing his warning, Barak had two goals: to prepare Israeli public opinion for future peace moves and to put pressure on the government to give him more leeway on secret peace feelers he has been putting out to Damascus for the past few months.This article was published in The Jerusalem Report on March 1, 2010. To subscribe to The Jerusalem Report, click here.But although clearly aimed at a domestic audience and intended to promote peace talks, the Syrians chose to take Barak's statement as a threat of impending war. 'Israelis, do not test the power of Syria since you know the war will move into your cities,' Syrian Foreign Minister Walid Muallem warned. This, in turn, proved grist to Foreign Minister Avigdor Lieberman's mill: In threatening to attack Israeli cities, the Syrians had crossed a red line, he fumed. And he warned that '[Syrian President Bashar] Asad should know that if he attacks, he will not only lose the war; neither he nor his family will remain in power.'On the face of it, it was a case of sharp rhetorical escalation that could trigger hostilities. In fact, the parties were all using rhetoric to promote more subtle agendas.In highlighting the risk of war, Asad was trying to build international pressure on Israel to engage with Syria on his terms. He hoped to frighten the Americans into thinking that a destabilizing confrontation - which could impact on the U.S. position in Iraq - was a real possibility. On the other hand, he suggested that war could easily be avoided if only the Israelis could be persuaded to commit to returning the Golan Heights to Syria as a condition for peace talks.What Asad is after is an Israeli reaffirmation of the so-called 'Rabin deposit,' a hypothetical pledge ahead of negotiations by Israel to return the Golan Heights if Syria signs a peace treaty that meets Israel's peace and security demands. 'If they say you can have the entire Golan back, we will have a peace treaty,' Asad told the New Yorker in an interview, published in early February. Because of the impending American withdrawal from Iraq, Syria, over the past few months, has become an increasingly important element in America's regional thinking. On a recent visit to Damascus, U.S. special peace envoy George Mitchell informed Assad that, after a five-year hiatus, the U.S. was ready to appoint a new ambassador to Damascus.In return, Asad promised intelligence cooperation with the CIA and Britain's MI6 to prevent al-Qaeda and other radical terrorists from operating from Syria against U.S.-led forces in Iraq, and so help secure the planned withdrawal and create conditions for stability in its wake. Asad also tried to use the deal to ratchet up the pressure on Israel. He made it clear to Mitchell that the degree of intelligence cooperation would depend on progress in the peacemaking - in other words, at least initially, on American pressure on Israel to reaffirm 'the deposit.'Behind the scenes, Barak has been trying to get the peacemaking with Syria, stalled since the fighting in Gaza last winter, off the ground. He has appointed ex-general Uri Sagie, a veteran negotiator with the Syrians, to head the project. Peace talks between Barak and Asad's late father broke down in early 2000, and to this day many analysts charge Barak with a blunder of historic proportions in failing to secure a peace that was there for the taking.Now Barak seems to be motivated by a desire to rectify that personal failure. And there has been some positive movement. Leaders from France, Italy and Spain have signaled a readiness to play a mediating role. In Damascus in early February with a message for the Syrians from Prime Minister Benjamin Netanyahu, Spanish Foreign Minister Miguel Moratinos declared that in Israel he had 'not heard the war drums beat,' and that, on the contrary, all the talk was of peace.Military intelligence estimates that the chances of a breakthrough with Syria are good. It says Asad has no war plans and that a peace with Syria that weakens the Tehran-Damascus connection is a major Israeli regional interest. Both Barak and IDF Chief of Staff Gabi Ashkenazi share that view. 'Instead of trading verbal blows, let's sit down and talk,' Barak urged Asad after the rhetorical fireworks.The problem, though, remains the 'deposit,' first given by Yitzhak Rabin in 1993 and reaffirmed by prime ministers Shimon Peres, Barak and Ehud Olmert, but at which Netanyahu is so far balking. He says talks must begin 'without preconditions' - which means without an Israeli 'deposit' or starting from the point reached in the Turkish mediation effort suspended in the wake of the Gaza war.Lieberman's tough talk seems to be largely designed to torpedo Barak's peace initiatives. He is worried that pressure on Netanyahu from Barak and the Americans might lead to the 'deposit' being reaffirmed. So far, Lieberman has been successful in blocking potential peace avenues. He was instrumental in rejecting resumption of the Turkish mediation effort, and has made it abundantly clear that he will do all he can to prevent the Golan being returned to Syria. The Syrians, he says bluntly, should start getting used to the idea of ceding the Golan to Israel, the way they gave up the much larger Iskenderun-Alexandretta area to Turkey, in 2005.Despite the tough talk on both sides of the border, there are no signs of war preparations on the ground. In January, Israel conducted a major military exercise on the Golan, but was able to reassure the Syrians that it was no more than routine training. The trouble is that even if neither Israel nor Syria wants war, the regional dimension, specifically the Iran-Syria alliance, creates a tinderbox situation. Iran, under pressure from the international community, could lash out against Israel through its Hizballah proxy in Lebanon, setting off a new round of hostilities with pressure on its Syrian ally to join the fray. That scenario is one of the chief reasons Barak and the Israeli military are keen to engage Syria and reduce the threat of an Iranian-induced missile war on Israeli cities launched from Syrian soil.Netanyahu almost went to war with Syria once before. In the summer of 1996, at the start of his first term as prime minister, a misreading of Syrian troop movements brought the two countries to the brink. Confrontation was only averted through the moderating role played by then-defense minister Yitzhak Mordechai. Interestingly enough, that scare was followed up by Netanyahu attempting to achieve peace with Syria through his close confidant, American Jewish leader and cosmetics tycoon, Ron Lauder. Will the growing Iranian menace have a similar effect on Netanyahu's thinking?Besides the Iranian nuclear drive, Netanyahu sees two other existential threats: a Palestinian state without adequate security arrangements for Israel and the campaign to delegitimize Israel on the international stage - a campaign in which the U.N. Human Rights Council's Goldstone Report on alleged Israeli war crimes in Gaza poses the most insidious challenge.Inside both the Labor party, a member of the government coalition, and Kadima, the main opposition party, there is a growing body of opinion that having Lieberman as foreign minister is hurting Israel in this battle for legitimacy and that his blunt, aggressive style plays into the hands of Israel's worst critics.Lieberman though is unfazed. His tough talk plays well with his mainly Russian immigrant electorate and receives glowing reviews in the Russian-language press.And although a Dialog poll published in Haaretz in early February shows his party Yisrael Beiteinu slipping slightly from 15 seats in the current Knesset to 14 if elections were held today, Lieberman seems to have discerned new potential for his party on the Israeli right.His aggressive tone seems to be aimed partly at winning disgruntled right-wing voters away from the Likud after Netanyahu's freeze on settlement building in the West Bank. According the Dialog poll, Lieberman's abrasive style seems to be hurting him with center-left Israelis, but not on the right where his natural constituency lies: 53 percent of those polled said they were unhappy with Lieberman as foreign minister, but as many as 34 percent thought he was doing a good job.Still, because of the damage center-left politicians believe Lieberman is doing, there is now talk in political circles of Kadima coming into the government to replace Yisrael Beiteinu. The thinking is that this would dramatically change Israel's international image by signaling a real readiness for peace. One way this could happen would be if Barak were to threaten to bolt the coalition unless Netanyahu fires his uncouth foreign minister. Netanyahu would then have to choose between a narrow right-wing government pilloried on the international stage and a broad center-left coalition hailed internationally, but which might press him to go further than he would like on the peacemaking front.Such a coalition change could have far-reaching regional implications.The thinking in political circles, however, is that the chances ofBarak presenting Netanyahu with a 'fire-Lieberman ultimatum' are low.The Labor leader, pundits say, is too attached to his Defense Ministryseat to risk losing it.That means game-changing political and regional moves could depend onthe new Attorney General Yehuda Weinstein. Over the next few months, hewill have to decide whether the evidence against Lieberman on a slew offinancial allegations warrants an indictment. That would force thefirebrand foreign minister's resignation and open up new coalition andregional possibilities.