Media claims that President Barack Obama is close to brokering a deal between Israel and the Palestinian Authority (PA) ignore the deepening political crisis in the Middle East. Obama’s efforts to restore Washington’s position and influence and realign relations in pursuit of American geo-political interests rely on increasingly unstable regimes throughout the oil-rich region.

The wildest claims of a breakthrough accompanied the agreement by Israel not to issue any new tenders for settlement construction in the West Bank until 2010. This followed talks in London last week between Israeli Prime Minister Benyamin Netanyahu, British Prime Minister Gordon Brown and US special envoy to the Middle East George Mitchell.

There will be at least two more rounds of meetings in Washington and Jerusalem over the next fortnight before Obama can make an announcement on a peace conference at the United Nations General Assembly meeting due to start on September 23, or at the G20 summit in Pittsburgh over the ensuing two days.

The six-month freeze is being hailed as a breakthrough by commentators anxious to bolster illusions that Obama can refashion American foreign policy after the disastrous Bush years. It is nothing of the sort.

The freeze does not prevent 2,400 settler homes being constructed, as most of these are being built by private companies. Government-driven settlement construction accounts for only 40 percent of the total. The freeze also excludes construction work in East Jerusalem, where Palestinians are being evicted from their homes under court order so that settlements can be built.

In addition, any freeze, however temporary, is anathema to Netanyahu’s right-wing coalition partners and the ultranationalist and religious movements that are committed to an expansionary policy and opposed to any form of Palestinian state. The Palestinian Authority for its part views a total freeze on settlement construction as essential if talks on the establishment of a Palestinian state are to restart.

Obama has made clear that all that is on offer is a demilitarised and bifurcated state comprising Gaza and the West Bank, which would consist of several non-contiguous blocks, penned in by an eight-metre-high concrete wall and controlled by Israel.

Israel is vehemently opposed to the return of Palestinians who were driven from their homes or fled in 1948 and 1967, and the descendants of these displaced people, and the handing back to the PA of East Jerusalem, illegally annexed after the 1967 war. It is far from clear that any deal, even if it were acceptable to the PA, could be sold to the Palestinian people, who are in the main deeply hostile to the PA.

Crucially, and largely downplayed in the media, the London talks conceded to a key Israeli demand—a tougher US approach to Iran as the price for the temporary and partial settlement freeze. Washington and the major European powers are planning to impose more punitive sanctions if Tehran fails to stop uranium enrichment by the end of September. Tehran maintains that its uranium enrichment programme is intended solely for the generation of power. Sanctions against Iran’s oil and gas industry would be “crippling,” according to US Secretary of State Hillary Clinton and Netanyahu.

Israel is demanding sanctions on the export of refined petroleum products to Iran. This would hit Iran hard. While Iran, which has one third of the world’s known oil reserves, is a major oil exporter, it imports 40 percent of its refined petroleum and diesel as a result of sanctions that have hit its refinery capacity.

However, for the US and European powers to go it alone without UN backing would precipitate bitter trade wars. It will be far from easy to get agreement from Russia and China, which will be necessary if sanctions are to gain approval from the UN Security Council. China is dependent upon Iran for its oil and gas.

An embargo on refined petroleum exports to Iran would be tantamount to an act of war, since it would require warships to police the entrance to the Persian Gulf.

The alternative of an embargo on the sale of equipment and technology to Iran’s oil industry would represent less of a threat to Russia and China, as it would largely impact suppliers from the West. However, it would have a less immediate effect. It would, moreover, not be acceptable to Israel as a quid pro quo. Israel has threatened to attack Iran’s nuclear facilities if Tehran does not halt its uranium enrichment programme.

Washington’s unwillingness to dictate the terms of a deal with the Palestinians to Israel reflects, in part, divisions within the Obama administration over how to deal with Iran. Vice President Joseph Biden has supported Israel’s “right” to attack Iran militarily if it deems such an attack necessary to defend its security interests, although Obama himself has opposed it.

Washington’s attempt at regime change in Tehran through its backing of the opposition forces in last June’s presidential elections has thus far proved unsuccessful. But it continues to try to exploit the bitter internal struggle between the rival bourgeois factions in Tehran’s clerical regime.

By ratcheting up the pressure on the Iranian government, which appears increasingly unstable, Washington hopes to shift the balance of power in favour of the defeated presidential candidate Mir Hossein Mousavi, his patron, the billionaire former president Ali Akbar Hashemi Rafsanjani, and their allies.

This faction has criticized the foreign policy of President Mahmoud Ahmadinejad as reckless. It has signalled its support for a more rapid introduction of free market economic policies, a wider opening to foreign capital and a rapprochement with US imperialism.

The US is also seeking to isolate Iran from its allies, Syria and Hezbollah in Lebanon. It has therefore sought a rapprochement with Damascus and a peace agreement between Israel and Syria. However, Israel’s right-wing government is opposed to any concessions to Syria.

In Lebanon, Washington’s client, Saad Hariri, has been unable to form a government nearly four months after narrowly winning the election, leading to a tense political situation.

Crucial to any realignment in the Middle East is Egypt, which has since 1978 been America’s key ally. As the first Arab state to recognise Israel, Egypt has played a leading role for the last 30 years in ensuring Israel’s security by supporting Israel’s wars against Lebanon, brokering talks aimed at suppressing all militant opposition by the Palestinians, and policing Egypt’s border with Gaza.

Today, Egyptian President Hosni Mubarak’s allotted role is to broker some kind of an agreement between the PA, which controls the West Bank, and Hamas, which controls Gaza, in order to restore the PA’s control over Gaza, end the smuggling of weapons to militants via Egypt’s border with Gaza, and suppress all armed opposition to Israel. Obama also wants Egypt to secure the agreement of the Arab states to normalise relations with Israel and support Washington’s policy towards Iran.

This is a lot to ask of a weak and unpopular regime. Cairo’s support for Israel and the US war and occupation of Iraq profoundly destabilised political relations within Egypt and destroyed its political credentials with the wider Arab world, resulting in increasingly strained dealings between Washington and Cairo. Obama has sought to restore relations with Egypt and last month President Hosni Mubarak paid his first visit in five years to Washington.

But the Mubarak regime is in its dying days. With the 81-year-old president in poor health, the issue of who is to succeed him has come to dominate Egyptian political life. The main political opposition, the Muslim Brotherhood, which is unacceptable to both the Egyptian and US political establishment, is banned—they have to stand as independents in an election—and their members are subject to a campaign of arrests.

Mubarak is grooming his 46-year-old son Gamal to succeed him. This is a move that is deeply unpopular not just with Egyptians, but also with the military, which is the real power behind the throne. There have been suggestions that the military would prefer General Omar Suleiman, who is the interior minister, to succeed Mubarak.

In the absence of a smooth succession, there are fears of a military coup aimed at pre-empting broader political unrest—a situation that would profoundly destabilise the whole region. There have been some 1,500 protests over economic and social issues in recent months, fuelled by growing poverty and hardship. Egypt’s 78 million people face mass unemployment and rapidly rising inflation, with 40 percent living near or below the poverty line.