Israel is willing to resume negotiations immediately without preconditions. The Palestinians, however, insist a halt to all settlement activity before talks can resume and scoff at Israel's insistence it be recognized as a Jewish state. Hamas, meanwhile, strengthened its support in the West Bank and Gaza, and one Palestinian expert said Hamas political leader Khaled Meshal has his eyes on Ramallah.
The recent U.N. vote upgrading the Palestinians to non-member observer status was viewed in Jerusalem as a one-sided attempt "to dictate terms of references in peace negotiations," Israeli government spokesman Mark Regev said. It was publicly rejected by Israel and Jerusalem's response was to announce the construction of 3,000 housing units in the E1 area, linking the city of Ma'aleh Adumim to Jerusalem and West Bank settlements, and to withhold the payment of tax revenues to the Palestinian Authority.
The international arena and the Palestinians harshly criticized Israel for the moves, saying such steps distance it even further from a peaceful solution. Palestinian President Mahmoud Abbas called the move a crossing of a "red line" and said he may take action against Israel at the International Criminal Court in The Hague.
Professor Efraim Inbar, director of the Begin-Sadat Center for Strategic Studies, called the United Nations a "morally bankrupt institution" but said the upgraded Palestinian status won't affect the position of either side.
"Chances of a real peace process between the Palestinian national government and the Zionist movement are slim," he said.
The U.N. vote is much to do about nothing, said Gerald Steinberg, president of the non-governmental organization Monitor and professor of political studies at Bar Ilan University.
"The U.N. General Assembly has no real power and the upgraded status is mainly a changing of name plates," he said. "The conflict has been going on now for 64 years. There is no reason to believe the 65th year (2013) will be any different. The Palestinians have made no significant changes in their position."
The Palestinian people are tired of slogans, said Mahdi Abdul-Hadi, director of the Palestinian Academic Society for the Study of International Affairs in East Jerusalem.
"Uncertainty lies ahead: Israel's actions, the unrest in Cairo, political Islam, reconciliation between Fatah and Hamas. For the people in the street there are no dreams, no more prophets," Abdul-Hadi said. "People are tired of slogans, talk of peace and negotiating tables. They want something different now that the Palestinian status has been upgraded."
Washington and Cairo will remain the key players Abdul-Hadi said. Egypt wants to be involved in reconciliation efforts between Fatah and Hamas and the Palestinian-Israeli conflict, and is key in maintaining regional security, he said.
There has been no direct dialogue between Israel and the Palestinians since September 2010.
In the coming year, there may be some symbolic gestures due to U.S. pressure, Steinberg said.
"I imagine there will probably be some kind of ceremony for negotiating as a result of U.S. pressure but chances of any significant agreement being reached is close to zero," he said.
"I think a new generation of Palestinian leaders is required in order to get the peace process back on track," Inbar said.
Abdul-Hadi said it is unclear whether Abbas will resign but Meshal wants to become more involved, he said.
"It is no secret that Meshal desires to take the place of Yasser Arafat," he said.
In the event Meshal becomes the next Palestinian leader, chances of peace talks resuming would be nil. For Israel, Hamas is a terrorist organization, not a peace partner. Hamas refuses to recognize Israel and seeks its destruction.
Indeed, in a recent visit to the Gaza Strip, Meshal reiterated his movement's refusal "to give up an inch of the land of Palestine."
"Palestine from the river to the sea, from north to the south, is our land and we will never give up one inch or any part of it," Haaretz quoted him as saying.
"Israel's insistence to be recognized as a Jewish state is ridiculous," Abdul-Hadi said. "No one under the sun, not in Washington or elsewhere will recognize Israel as a Jewish state. It would lead to a religious war."
"We are ready to start negotiations the day that Israel stops building settlements, and abides by international law," Fatah official Nabil Shaath told Ma'an News Agency. "We consider the construction of settlements, the insistence by Israel that it be called a Jewish state and the blockade of Gaza as preconditions to negotiations."
"Israel's policy remains clear: We are ready and have been ready for the immediate resumption of peace talks on all core issues -- talks designed to achieve peace. The Palestinians have rejected the idea of direct dialogue and placed preconditions for the resumption of talks. I hope negotiations will resume in the coming year, but you have to ask the Palestinians if they are willing," Regev said.