Tony Blair is not widely renowned as a master of understatement. But it is with magnificent restraint that he acknowledges the price he has paid for taking sensible positions on combating terrorism, radical dictatorship and Islamic extremism. "I ended up in a situation where I was in profound disagreement with a large part of [British] public opinion on it, yeah," he notes briskly in the course of a fascinating interview. Then he adds, simply and wryly, "Which is tough." Tough indeed. In fact his support for President Bush in Iraq and the wider struggle against terror was arguably the most significant factor in his transformation from the immensely popular, fresh-faced leader of a new, fair-minded, confident Britain to a prime minister reviled by his own party, not to mention much of the British media, clergy, academia and other opinion-shapers, to the extent that he was forced to resign last year. No sooner had he moved away from 10 Downing Street, however, than Blair plunged himself into problem-solving in our neighborhood - whether out of a workaholic compulsion, or encouraged by his successes in Northern Ireland, or born of a determination to lead by example in thwarting extremism and fostering moderation, or, most likely, all three. And so it is that Blair has taken up intermittent residence in a top floor suite at Jerusalem's seamline American Colony hotel - a leafy rooftop oasis whose calm he would hope to spread to the troubled lands that spread out beneath him. In our conversation, conducted at breakneck speed, Blair displays considerable clear-sightedness about the complexities of his latest mission and maintains his traditional empathy for Israel's worries. "I get your security situation completely," he says tellingly near the end of the interview. "If I was you, I would not yield on security at all. That's not my point. My point is a different one, which is if a Palestinian state is ultimately in your long-term interest for reasons of security, you should try and make it happen - on the right terms, but make it happen - not just be indifferent to whether it happens." He is also witheringly, indignantly critical of international tolerance for Islamist extremism, and the readiness he perceives to appease its various murderous tentacles. "The trouble with a large part of the Western world is that we're in a state of semi-apology the whole time and that's an absolutely hopeless position from which to take this thing on," he storms. "A large part of public opinion in the West is basically saying, 'We have caused this. It's our fault they're like this.' I just think that's nonsense." Blair is a fluent interviewee, clearly deeply committed to his envoy's role, though evidently less than certain that he can crown it with success. Only a few months into the job, indeed, there is frustration, and you get the sense that he is starting to wonder whether all the players directly involved are quite as intent on resolving this conflict as he is... Israel marks its 60th anniversary in May. Do you think it's still going to be here in 60 years' time? Or more to the point, what does it need to do to guarantee its survival? Will Israel be here in 60 years' time? Absolutely. Yes. To guarantee its long-term security I believe it needs a viable Palestinian state. That is the key to making peace in the region with its neighbors; it's also better than the alternative, which is living with a disgruntled, unhappy group of people with terrorists operating amongst them. The absolutely fundamental question is how do we make sure that such a Palestinian state is viable - not just in terms of its territory, which is the normal way that that term is used, but in terms of its governance. Looking at this purely in terms of "land for peace" is actually a rather old-fashioned idea. Actually, the fundamental question for Israel is not so much "How do you negotiate the individual bit of the territory?" because, give or take, that can be done. It's actually "How do we know that if we permit statehood for the Palestinians on our border, that state is going to be a serious partner for peace in the long term?" ... You've been slightly optimistic about Annapolis making a difference. What's the source of your optimism? Because, in the end, it is in Israel's interest to have a Palestinian state and, in the end, for the Palestinians there's nowhere else to go. They have a different leadership now. They've got a president who's well-intentioned and a prime minister who's got real executive capability. Now, they're going to have to make big changes on the Palestinian side for this to happen. But in my view the sensible thing for Israel to do is to help them do that. Do you think that Abbas is ready, at any stage, to renounce the right of return? It's not for me to negotiate for Abbas, but I think Abbas knows exactly what he needs to do to have a proper final status negotiation. It's for him to decide the tactics of that, the strategy of that, but I think everybody knows there's got to be an Israeli state which is confident about its security and a Palestinian state. Now once you accept a two-state solution, once you actually internalize that, the consequences in terms of the ultimate negotiation are fairly clear. Abbas may be well-intentioned, but he hasn't been able to reform Fatah, lost parliamentary control and lost Gaza now to Hamas. What practically gives you optimism, or what mechanisms are you trying to put in place that would enable him and the current leadership to function effectively? What people say is, "Over the past few years, things have gone backwards because he's lost Gaza and there have been even greater restrictions on movement and access on the West Bank and so on and so forth." My answer to that is to go back to first principles. You go back and ask the question: Is it necessary that they achieve statehood? And if it is, you've got to put in place the mechanisms that allow them to get there. And that is why the December [international donors'] conference in Paris will be every bit as important as Annapolis, because at that conference the Palestinians will produce a medium-term strategy for reforming their authority. If that is a good plan and if we have a strategy for implementation, that is what starts to put right some of the things that have gone wrong over the past few years. Is it your sense that the two sides know what the terms need to be for a final settlement and the concern now is how you get there, the interim process? For example, Israel is not going to hand over territory a shoulder-held rocket away from Ben-Gurion Airport. Absolutely. The beginning of understanding here is to realize that what the Israelis say about security is essentially correct - namely that at the present time the Palestinians cannot handle their own security on the West Bank, never mind Gaza. And that what the Palestinians say about the effects of occupation on the Palestinian territory is also correct - it is hugely disadvantaging ordinary Palestinians... The issue is how do you make sure that the Israeli concern [over] security is dealt with at the same time as the Palestinians are able to remove the restrictions. But you don't propose bringing in large numbers of outside forces to shepherd the Palestinians to security capability? No, I don't think you do that, but there's a role for the international community at every level in supporting the Palestinian institution-building... Is it really possible for the Palestinians to make these changes? Most people in Israel today would regard Jordan, in its internal governance, as being a stable partner. It's not impossible for the Palestinians to make these changes, but they've got to make them. As I say, they live with a very long legacy from the past. From which it's not clear enough on the Israeli side that they have broken. It's clear to you? It's clear to me that that is the test. Do they break out of that whole mindset? Do they regard themselves as people who are going to take the risks, shoulder the responsibility and get it done or not? That is the question. All I say to Israelis, when they say to me, "Well, they're just not going to do it," is, "Well, put it to the test. Because if they don't, what is the alternative?" I want to make sure I'm characterizing you fairly: On final status issues you would say the two sides are more or less on the same page? I would say it is possible to see how an agreement could be reached. Not that one has been reached, but that it's possible to see how they could. And in my view the Palestinians are prepared to be realistic, sensible and focused in agreeing those terms in the final status negotiations. And capable of marginalizing the bad guys? I think they are capable of marginalizing them if it is clear that they are going to have such a negotiation. That's why it's important that Annapolis gives a perspective for the political future. And if they take the measures necessary to build their own capability. Because in the end undoubtedly there will be people who try to stop them doing this... Where does Gaza fit in now, given that it's not controlled by the people who are negotiating? If you can get to the point where this process moves forward again, then there will come a moment in which it is right that an offer is made to the people of Gaza to come back into the fold... In the meantime it is important to make sure that we look after the people in Gaza, even if we're distanced from those who are running Gaza. Has Israel done enough to give the process a chance at this stage? ... In economic areas, there is a lot that Israel could do that doesn't actually require big changes in terms of the security context... [But it comes] back to the very first question you posed: What is necessary for Israel's long-term security? If your answer is that "the best form of security would be that we have an Israeli state and they have a Palestinian state because they are a stable and secure partner," the psychological shift that has to happen in the Israeli thinking is to move from saying, "Well, if it happens, it happens, but frankly I'm skeptical about the whole thing," to saying, "Okay, I'm going to try and make it happen... I'm not going to make it happen on any terms other than those consistent with my security, but nonetheless I'm going to see what we can do to make it happen." Are you confident that the essential components of the Israeli government have made that shift? The next few weeks will tell. I'm sure that the prime minister is absolutely up for it. I've got no doubt about that at all. The next few weeks will tell whether everyone is prepared to get behind that. The psychological hesitancy and skepticism is a consequence of all the bad things that happened before... Absolutely... I was in America recently and getting criticism about, "Are the Israelis really serious?" I was saying to them, "Look, understand from their point of view - they disengaged from Gaza, they got rid of the settlements and look what happened. So when you're saying to [Israel], 'We now want you to pull out of everywhere and give [the Palestinians] a state,' you know, any of us who were in the shoes of the Israeli prime minister or any Israeli minister would be saying 'whoa.'" It's not just disengagement, it's the whole Oslo years as well... Yes, of course. The danger, though, in this situation, if I can be very blunt about it, is that you say, "There have been 60 years of failure of negotiation and therefore it's always going to fail," whereas actually sometimes things aren't like that... Do you attribute the bombings in London and other terrorist attacks to failure on the Israeli-Palestinian front? No. Resolving this issue is of fundamental importance to resolving the struggle inside Islam between the moderates and the extremists. But this dispute didn't cause the terrorism and solving it won't in itself solve [terrorism]. Ultimately we're all on the same side. The Israelis, the Palestinians, moderate Arabs, ourselves are actually all on the same side against the extremists... I don't believe, incidentally, that Iraq is the reason why these bombings happen, or Afghanistan. My view is it's Iraq that they'll use as an excuse, or it's Afghanistan, and before either of those two, Kashmir, and before those three it was Palestine, and before any of those it was Chechnya. And if you take it back, ultimately it's the presence of the West in Arab countries. This terrorism is not our fault. We haven't created it. However, in defeating it, we've got to have a strategy that is unifying of moderate opinion... a strategy with hard and soft power in it. This is why I find myself in a slightly unique position in terms of the international agenda. I am both on the hard side [in favoring] military action where you need it in order to defeat this terrorism, but I am also saying we need a solution to this issue, we need to deal with poverty in Africa, we need a galvanizing idea that is more powerful than their idea - more powerful for people inside Islam. And that idea is not simply about freedom and democracy, though it should be about that, but also about justice. The trouble with a large part of the Western world is that we're in a state of semi-apology the whole time and that's an absolutely hopeless position from which to take this thing on. Semi-apology? Less so here, but a large part of public opinion in the West is basically saying, "We have caused this. It's our fault they're like this." I just think that's nonsense. You, politically, in Britain were made liable for this wrong-headed thinking. I ended up in a situation where I was in profound disagreement with a large part of public opinion on it, yeah. Which is tough. But this is one of these situations where it's better to be in disagreement than to end up joining in a politics that I think is disastrous. If you look at the posture of much of the Western world on Iraq and Afghanistan, at the moment, it is, "If you come after us really, really hard, we'll give up." I mean, how do you win a battle from that perspective? So I'm completely on the hard side of the argument in terms of staying the course [in those two countries, and] taking on terrorism. I spend the large part of my first part of any conversation with senior Israeli people saying to them, "You keep thinking I think like other Europeans do. I don't." I get your security situation completely. If I was you, I would not yield on security at all. That's not my point. My point is a different one: If a Palestinian state is ultimately in your long-term interest for reasons of security, you should try and make it happen - on the right terms, but make it happen - not just be indifferent to whether it happens. Extend what you were saying about Iraq and Afghanistan to Iran. How do you grapple with Iran as the chief state sponsor of death cult Islamic extremism? The tougher we are, actually the easier it will be. The biggest mistake you can ever make in this situation is to think that if you act in a soft way you will make it easier, because you won't. Actually what they need to know is that the international community is united, strong and determined that they should not have a nuclear weapons capability and they should not continue to support terrorism. Why do you think Britain is so hostile to Israel? Why do you think the British people find it so hard to internalize the true essence of Islamic extremism? I don't think it's just Britain... It's in Europe [too]. In America you've got an element of it. The world over. There is this myth that values like freedom and democracy are basically Western values and that there is a different culture which we in our stupidity don't understand, where these things don't matter. My absolutely fundamental belief is that this is complete and total bulldust and that there has never been a case of people choosing not to be free. The idea that your average person anywhere in the world would not prefer to live in a free and democratic society is just ridiculous. We end up thinking that we are trying to foist some alien culture on these people that have just a different way of life, and that if we'd only stop provoking them with this "freedom" - and I don't just mean political freedom, I mean economic freedom, and I-Pods and TV and all the rest - if we'd only stop putting all that stuff before them, and provoking them in that way, then they'd behave reasonably towards us. Whereas I'm afraid it is absolutely 180 degrees the other way round. This is a group of people who are reacting against the modernization of the world and who are trying to prevent their own culture getting access to that modernization because they know perfectly well what the result will be, which is that the people will embrace it. And so what the extremists are doing, and what Iran is obviously trying to do, is frame the argument as Islam versus the West. That's why they try to use this issue, here, to say, "Actually the Israelis don't want to give the Palestinians a state. And that's because [the Palestinians] are Muslims, and America and Europe are backing the Israelis." This argument gets traction because it is not being challenged head-on. It is nonsense... You know, just before I left [the UK to come here], there was this guy who stopped me as I was going out of a hospital and said, "Why have you killed all those people in Iraq and Afghanistan?" And I said, "We're not killing people. We're trying to stop them being killed. And what is so oppressive to someone in Iraq or Afghanistan when you say we're getting rid of this terrible regime that is utterly brutal and dictatorial, and we're going to give you a United Nations-backed process for democracy where you elect your own government and what's more we're going to put you billions of dollars of support? What kind of oppression is that?" The fact that this person, who was a reasonably intelligent person, could say such a thing was bad enough. But what really struck me was that when I went back at him really hard, I could tell, although he was still obviously not convinced or anything, but I could tell it was the first time anyone had ever challenged that completely ridiculous view. Do you think Israel has effectively articulated these arguments? Israel can make its case better sometimes. To be fair, you can only make your case if people are prepared to listen to it. But I think there is a way of describing this security issue in terms... which make more sense to outside people. If Israel says, "Look, we can't have Hamas running the West Bank, firing rockets at Ben-Gurion Airport," I think people would say, "Yes, obviously you can't." But the nature of warfare has changed so much. These asymmetrical wars like we had against Hizbullah, like we have from Gaza, are incredibly hard to articulate. You've got closed societies that don't document their aggression, against the open society... That is absolutely true. But you can make a bigger impact on Western opinion by facing people up to what it's really like... laying the true problem before people. Then it is obvious that Israel is doing everything it can to get that solution for Palestinian statehood, albeit in the right way, namely consistent with its security. I find it quite easy to articulate Israel's case in the context of Israel actually wanting two states. What's harder is when people say, and this is what a large part of the world thinks at the moment, that Israel doesn't really want a Palestinian state at all, and therefore it's not really going to try to get one. I think the true Israeli position is that they will agree to statehood, but only if they're sure of the nature of the state. How long are you going to stick with this job? There is this talk of you for the EU presidency... It's open-ended. Are you going to stay in this job until there's an Israeli-Palestinian peace agreement, Mr. Blair? [Laughs] I'll stick in it as long as I'm useful.