Irked by the slow rate of progress in the Israeli-Palestinian peace talks, major Arab players are threatening to withdraw their offer to normalize ties with Israel once a Palestinian state is established.

Underlying the Arab reassessment is a deeper problem: Arab belief in the viability of a two-state solution is diminishing. And the fear in Jerusalem is that this growing lack of confidence could undermine the fragile negotiating process put in place at the peace parley in Annapolis, Md., last November.

The offer to normalize ties with Israel was part of the 2002 Arab League peace plan initiated by Saudi Arabia, intended as an incentive for Israelis to make peace with the Palestinians.

Now, however, in the run-up to a new Arab League summit slated for Damascus in late March, the Saudis seem to be having second thoughts.

Pointing to the slow advance in the peace talks, for which he blamed Israel, Saudi Foreign Minister Prince Saud al Faisal told a gathering of Arab and South American foreign ministers in Argentina on Feb. 21 that “despair will force us to review these options.”

Faisal accused Israel of sabotaging the Arab League peace plan, which he said was now “facing great danger.”

Arab League officials were quick to take their cue. They complained that Israel had not responded positively to the Arab peace initiative, so there was little point in leaving it on the table. The Arabs had extended the hand of peace, but now they faced “unprecedented Israeli obstinacy,” Arab League Secretary-General Amr Moussa declared.

Moderate Arab states such as Saudi Arabia, Egypt and Jordan had hoped that a two-state solution, followed by a general Arab accommodation with Israel, would weaken the radicals and pave the way for regional stability.

But concern is growing that with the Gaza Strip controlled by Hamas and the West Bank dotted with Jewish settlements, any future Palestinian state would be truncated and unviable — and as such a source of friction rather than a guarantor of stability.

Egypt, which shares a border with Gaza, and Jordan, which borders on the West Bank, are particularly worried. Both still see the two-state solution as a major strategic interest, but are growing more skeptical over the chances of achieving it.

For a full-fledged Palestinian state, including the West Bank and Gaza, to emerge, first there would have to be an accommodation between Palestinian Authority President Mahmoud Abbas’ moderate Fatah movement and the Iranian-backed Hamas.

This is the thrust of much behind-the-scenes Saudi, Egyptian and Jordanian diplomacy. Indeed, they reportedly are pressing Hamas to agree to cede its control of Gaza at the upcoming Arab League summit. But they are well aware that the chances of that happening are extremely low given Iran’s unyielding opposition to anything that might help the moderate camp.

Many Palestinian intellectuals, including some close to Abbas, are questioning the merits of the two-state solution. In an op-ed in the British Guardian newspaper, Oxford-based scholar Ahmad Samih Khalidi — sometimes referred to as “Abbas’ brain” — argued, “Today, the Palestinian state is largely a punitive construct devised by the Palestinians’ worst historical enemies, Israel and its implacable ally, the U.S. The intention behind the state today is to constrain Palestinian aspirations territorially, to force them to give up on their moral rights, renege on their history and submit to Israel’s dictates on fundamental issues of sovereignty.”

“The temptation,” Khalidi added later, “is to say thanks but no thanks.”

Instead, Khalidi warned that the Palestinians could “evoke [Israeli Prime Minister Ehud] Olmert’s worst nightmare,” and go for a single state, “a genuine partnership in sharing the land” on the basis of one man, one vote.

Other Palestinians are suggesting that barring major progress toward viable statehood by December, the Palestinian Authority should dissolve itself and hand the keys back to the Israeli military. The struggle then would not be for statehood but for equal rights in a single binational state.

This scenario is indeed one of Olmert’s worst nightmares. On the last day of the Annapolis summit he declared that if the two-state solution collapses, “Israel is finished.” What he meant was that in a one-man, one-vote unitary state — Israel and Palestine together — the eventual Palestinian majority would spell the end of the Zionist notion of independent Jewish statehood.