June 5, 1967: Every Israeli feared for the survival of the state as war broke out to defend Israel against a pan-Arab threat to our very being.Gamal Abdel Nasser, the president of Egypt, had committed to fight for the annihilation of Israel and, in the wake of his rhetorical charade, the rest of the Arab world followed. The Straits of Tiran had been closed in May that year by motivated armies and hateful societies and Israel was now encircled.Under the leadership of the patient and wise prime minister Levi Eshkol, Israel was compelled to launch a preventative strike and, within only six days, defeated all surrounding Arab armies, conquered the Sinai Peninsula (three times the size of Israel), the West Bank (including east Jerusalem) and Gaza as well as the Golan Heights.The writer is president of the Peres Center for Peace and served as Israel’s chief negotiator for the Oslo Accords.Israel felt a deep sense of relief coupled with pride bordering on euphoria, which quickly translated into a national hubris and an illusion of omnipotence.The Arab world felt deep humiliation that quickly translated into a sense of helplessness, frustration and rejection of any realistic approach.These two psychological realities drove Israel and the Arab states to draw fundamentally wrong conclusions from the Six Day War, with tragic ramifications for decades to come. The Arab states became even more entrenched in their rejection of the Jewish State; they convened in Khartoum (in August 1967) and declared in a loud and unified voice: No to peace with Israel, no to recognition of Israel, and no to negotiations. The hostility to Israel weighed heavily on the Arab world with inflated defense budgets and backward economies; political and social reforms were sacrificed.The result was the maintenance of dictatorial regimes with much of their energy spent in Pan-Arab diplomacy, sloganeering their hate and rejection of Israel, obsessed by a need for vengeance, distanced from the West. The Palestinians, for whom this national struggle had originally been waged, were thrown to the political sidelines, including by Jordan’s King Hussein in the Black September of 1970, and were left suffering in refugee camps and reacting with PLO terrorism.The Arab states did very little to redress the 1967 defeat, with the one important exception of Egypt. President Anwar Sadat, coming to power in 1970 with little experience, yet much courage and wisdom, challenged Israel both diplomatically (in 1972) and militarily (in the 1973 October War).Humiliation turned into Egyptian pride, hostile policies were replaced with rapprochement to the West and, with the historical breakthrough of president Sadat’s courageous visit to Jerusalem, the first Arab peace treaty with Israel and the return of Sinai. His successor, Hosni Mubarak, while not turning Egypt toward greater openness and democracy, continued the strategy of peace, in the national interest of Egypt, for which he is to be credited, even to this day.Yet the Arab world did not follow Egypt’s lead; it only began to alter policies grudgingly and gradually, starting with the Madrid Peace Conference in 1991.Israel too managed, through many historical misconceptions and mistakes, to become a big loser from what occurred in June 1967. In our hubris, we drew dramatically wrong conclusions of the victory. We believed, and to a large degree still do, that every regional challenge has a military solution.From the Palestinian issue through the Lebanon quagmire, to the false notion that if we just let the IDF fight, solutions will be found – “Let the IDF win,” as the slogan goes.While the world supported us in 1967 and its immediate aftermath, we felt, and still feel, best in isolation. We also committed the mistake of underestimating the Arabs, looking down on them, not seeing them as equals, to be rudely awakened by the 1973 War, the Lebanese wars and two intifadas.Yet the most dangerous process, post ’67, is linked to the fact that overnight we became the rulers of 3 million Palestinians and, quickly, became enamored with a dangerous occupation and the rule over another people. This occupation had, and has, a heavy cost, almost challenging our very identity as a Jewish and democratic state. First and foremost we became morally corrupted by occupation. We never attempted to treat the Palestinians as equals, humiliating them on a daily basis for 45 years. Modern Zionism and our international appeal had been driven by a strong moral call, stemming from our biblical heritage and from our modern-day dramatic nation-building process. After 1967 we gradually turned from victims – strong enough to overcome their tragic fate – to victimizers, weak enough to not resist the temptation of force.Not only did we not look for ways to detach from the Palestinians in favor of our own Jewish state, but we drove our national existence deep into the West Bank with the foolish settlement enterprise, leading 300,000 Israelis into the territories and making a political solution virtually impossible.These changes turned us, in the eyes of the nations, from a David into a Goliath, from one of the most celebrated countries in 1967 into an island of isolation, boycotted today in many parts of the world.Our democracy also paid a heavy price for the occupation, as democracy and ruling another people on the doorstep cannot coexist in the long run. So our political and judicial systems suffer from the surge of rightwing nationalism based on the historical view of a Greater Israel. There is also the heavy economic price that we paid and are paying – it is estimated, by most leading academic and security experts, that we have spent $55 billion on settlements and their security since ’67.The value of the houses alone in the West Bank is assessed at $20b. by institutes such as Adwa and Macro. Sovereign Israel is turning into one of the most socially unjust societies in the OECD club, due to the growing gap between the haves and the have-nots and the lack of investment in education and social services.And yet the heaviest price of 1967 touches on our very identity. Without giving up the conquered West Bank, we will in the years to come be a minority in our own land, endangering our Jewish and democratic identities.Forty-five years after the war, it is time for both Israelis and Arabs to draw the right conclusions from mistakes committed due to hubris on one side, and humiliation on the other. The Arabs must recognize that Israel as a Jewish state is here to stay and that, within its sovereign boundaries, it has many successes that can be shared in an improved relationship. And we need to understand that the occupation must come to an end, in reconciliation with an independent Palestinian state, with security, without the return of Jews into the historical Judea and Samaria, and without a return of Palestinians to the historical “Greater Palestine.”The Arab countries and Israel must finally find the courage, after a delay of 45 years, to look reality in the face, giving up on fanatical rejectionism and humiliating occupation, and recognizing that we are rather small powers, not omnipotent and not eternal victims, but rather we are interdependent and dependent on a larger world. Better much too late than never.