The international diplomatic boycott of the Hamas-led Palestinian unity government is leaking, but at its most official level, the Quartet, it is holding. In a statement issued Wednesday, the Quartet reaffirmed its three conditions and stated that "the commitment of the new government in this regard will be measured not only on the basis of its composition and platform, but also its actions." This result may be considered a victory for American and Israeli diplomacy, since it means that Western assistance will not go directly to Hamas. But Western aid continues to flow to the Palestinians at a tremendous rate - $1.2 billion in the year since the first Hamas government took office, an increase from the previous year and the highest per capita assistance for any people in the world. The Quartet statement is being followed next week by a flurry of diplomatic activity. US Secretary of State Condoleezza Rice, UN Secretary-General Ban Ki-moon, German Chancellor Andrea Merkel and US House Speaker Nancy Pelosi are all expected here. Now that the issue relating to Hamas has been wrestled to a standoff of sorts, what should Prime Minister Ehud Olmert's objective be with his visitors next week? The first thing Olmert and Foreign Minister Tzipi Livni should realize is that their campaign to maintain the boycott on Hamas was a defensive one. "Winning" it does not improve our situation, it just avoids deterioration, leaving other dangerous processes - such as the weapons buildups of both Hamas and Hizbullah - intact. This moment of reprieve from playing diplomatic defense should be used to move international efforts in a positive direction. The key insight to impart is an obvious one: Neither engaging nor boycotting the Palestinians will alone pull them out of their radicalization and disarray. What is needed is for the Arab states to lead the way, and these states will not lead so long as Western countries do not more clearly point the way. In a recent Washington Post op-ed, David Ignatius reported that Rice "hopes the Arabs will discuss interim steps, such as ending hostile propaganda and exchanging trade missions and other low-level contacts [with Israel]. Rice's argument, in essence, is that a broad Arab-Israeli engagement is necessary during efforts to solve the Palestinian issue, instead of as icing on the cake after a peace deal is concluded." If this is true, Rice is absolutely on the right track in realizing that Arab states, if they truly want peace as they claim, need to lead by example by thawing relations with Israel. And certainly the opening of contacts would be a start, the more so if it led to something dramatic, like Arab and Israeli leaders meeting in each other's capitals. Yet even this would not really be enough to begin to undo the intense radicalization the Palestinians have undergone. During the same period that Israelis became more convinced of the necessity of a Palestinian state, Palestinians moved in the opposite direction. Since the 1993 handshake between Yitzhak Rabin and Yasser Arafat at the White House, a sea change has occurred on the Israeli side of the two-state bargain. For Israelis, accepting a Palestinian state has become mainstream. The problem is that the analogous Palestinian rubicon - abandoning the demand for a "right of return" to Israel - has not even been approached, let alone crossed. The Palestinians are too weak and divided to move in this direction on their own. But why should the Arab states start bringing the Palestinians down from their "right of return" tree if even the US does not treat this as critical to advancing a two-state solution? And why should the US place the necessary stress on abandoning that untenable demand if even Israel does not center its diplomacy on exposing the direct contradiction between a Palestinian "right of return" and Israel's right to exist as a Jewish state? The central obstacle to peace is the Arab refusal to accept Israel's right to exist. This refusal is embodied in the Palestinian demand to move to Israel, not just to a Palestinian state. International diplomacy must focus on admitting, explaining and addressing this obstacle, so that movement toward peace becomes possible.