THE GROWING instability in Egypt’s Sinai Peninsula represents one of the most dangerous, and most anticipated, crises in the Middle East. Even before the 2011 Egyptian revolution, the security vacuum in the Sinai allowed criminals and terrorists, including those with an ideology akin to Al Qaeda’s, to expand their operations. In the chaos after the revolution, these problems have worsened. Meanwhile, various Palestinian groups use the Sinai as a launching pad for attacks against Israel. The large-scale smuggling of weapons and civilian goods to and through this territory—much of it bound for Gaza—has fostered an illicit economy in both Gaza and Sinai while helping Hamas bolster its military capacity and political grip over Gaza. Increasing violence and instability in Sinai could complicate Egypt’s already-troubled transition and raise the prospect of renewed large-scale conflict between Israel and Hamas. And the reverse is also true, as witnessed by the dramatic spike in deadly violence in Sinai following the ouster of Egypt’s Islamist president Mohamed Morsi in July. In addition to instability in Egypt, prospects for an Egyptian-Israeli military clash also could be heightened, in which case the United States could find itself caught between its closest ally in the region, Israel, and a vital Arab partner on which regional stability depends.

On the surface, the Sinai-Gaza crisis looks simply like an issue of border security. Fighters and weapons go to and from Gaza via the Sinai, and these, in turn, are used to attack Israel and undermine stability in Egypt. Meanwhile, the illicit economies that have grown on both sides of the Gaza-Sinai border are largely the product of increased smuggling operations that grew in response to the closure of Gaza’s borders. But this surface picture shrouds much deeper and far more complex political issues. For Egypt, policing the Sinai is caught up in the country’s turbulent internal politics, with successive civilian governments, including the former Muslim Brotherhood–led government, the military and the intelligence services all wanting to avoid responsibility while asserting their power vis-à-vis one another. For Hamas, the smuggling economy is vital both to its military power and its ability to prop up Gaza’s feeble economy. Meanwhile, for the Fatah-led Palestinian Authority (PA), which was forced out of Gaza by Hamas in 2007, the Sinai problem underscores its growing political irrelevance.

The irony is that all of the main actors—Egypt, Israel, Hamas and the PA—would prefer to see changes in the status quo. Israel, of course, would like to have calm on its borders as well as neighbors that can deal effectively and responsibly with violence and smuggling, even if they are not openly friendly. Egyptian officials worry that instability in the Sinai will become a lightning rod for renewed war and a breeding ground for radicalism in Egypt, further undermining the credibility of the security services and any government, be it military or civilian. They also fear, with some reason, that Israel seeks to dump the Gaza problem in Egypt’s lap. Cairo also seeks to reassert its sovereignty in the Sinai, where restrictions imposed by the 1979 Egyptian-Israeli peace treaty are seen by Egyptians as an affront to national pride. Palestinian president Mahmoud Abbas and other PA figures would welcome the chance to return to Gaza as well as the added legitimacy that would come simply from being part of any new arrangement.

Even Hamas—or perhaps especially Hamas—worries about the Sinai. Many of the radicals there have links inside the Gaza Strip and oppose Hamas nearly as much as they oppose Israel, seeing the Palestinian group as insufficiently zealous in its pursuit of an Islamic state in Gaza and too accommodating with Israel. Moreover, whereas Hamas’s fortunes had improved following the Arab uprisings, the toppling of Morsi and the Brotherhood in Egypt dealt the most serious blow yet to Gaza’s Islamist rulers. Even under Egypt’s short-lived Muslim Brotherhood government Gaza’s borders were never fully opened. Moreover, since Morsi’s ouster, Egyptian authorities have imposed even tighter restrictions on the Gaza border and stepped up efforts to destroy the smuggling tunnels beneath the border, renewing and intensifying Gaza’s and Hamas’s isolation.

By working with Israel, Egypt, the PA and friendly governments in the region, the United States can help forge a new regional dynamic. All involved would have to make concessions, some of which would require risks. Doing so, however, would reduce the chance of a confrontation over Sinai, help protect Israel from attacks, make the success of peace talks more likely and improve regional stability. The goal would be to ensure not only that everyone gets something but also that everyone has a stake in continuing at least de facto cooperation.

EGYPT AND ISRAEL have long enjoyed a largely peaceful border, but even before the fall of Hosni Mubarak in February 2011 the Sinai had become home to numerous groups bent on attacking Israel. On February 4, 2008, a suicide bomber entered Israel from Sinai and attacked Dimona, a city close to the border that is the home of Israel’s nuclear establishment. Later, in two separate incidents in 2010, rockets fired from Sinai hit the resort town of Eilat.

The situation became more fraught after Mubarak’s fall. The most deadly cross-border event in years occurred in August 2011, when infiltrators based in the Sinai conducted multiple attacks near Eilat, killing eight Israelis. The Eilat attacks were dangerous not only because of the lives lost, but also because of the risk of escalation. Israeli forces pursued the attackers into Sinai and accidentally clashed with Egyptian troops there, killing five. Israel initially blamed the Gaza-based Popular Resistance Committees (PRC) and bombed several sites in the Strip, killing fifteen Palestinians, including the leader of the PRC. Hamas responded with rocket attacks, in which one Israeli was killed. A few weeks later, Egyptian protesters angry at the killing of Egyptian soldiers stormed the Israeli embassy in Cairo, prompting the evacuation of the ambassador and his staff and sparking a diplomatic crisis between Egypt and Israel.

Cooler heads in both Egypt and Israel prevailed (aided by U.S. mediation), and Hamas also backed down. But should another clash occur at a tense time in Egyptian politics—and Egyptian politics are very tense now—it may be hard for the regime in Cairo to avoid a confrontation. Israeli-Egyptian relations could sour, jeopardizing broader cooperation.

During 2012, the number of attacks on Israel originating in the Sinai grew considerably. According to a report from Israel’s intelligence service, eleven attacks emanated from the Sinai that year, including rocket attacks and five attempted infiltrations. Militants also routinely targeted the pipeline running from Egypt to Israel, exchanged fire with Israeli troops and planted explosives along the border. Many more attacks were thwarted.

Although Israel often blames Hamas or other Gaza-based Palestinian groups for the violence, frequently the attackers are Sinai-based jihadists, who are ideologically more like Al Qaeda than Hamas. As a report from Israel’s Intelligence and Terrorism Information Center concluded: “The Sinai Peninsula has been turned into a convenient venue for terrorist organizations affiliated with the global jihad.” Khalil al-Anani, a Middle East expert at Durham University in England, similarly warns, “Sinai is ideal and fertile ground for al Qaeda. It could become a new front for al Qaeda in the Arab world.” Although the threat is predominantly homegrown, the mix also includes a handful of foreign fighters. Israel asserts that Iran-backed groups such as Palestinian Islamic Jihad are also active in Sinai.

The threat comes primarily from elements within isolated and often-disaffected communities in Sinai or Gaza—and very often both, given the many tribal, commercial and other links that exist particularly among the bedouin communities of Sinai, Gaza and even Israel. Within these marginalized and interconnected communities, various Salafi-jihadi groups have emerged. These groups do not always cooperate with one another, but they often share a common leadership, cadres, training and supplies. And they are highly dangerous. Some wish to affiliate formally with Al Qaeda, while others do not. However, Al Qaeda has so far been reluctant to embrace these groups, perhaps due to doubts about their operational sophistication and overall level of support, though in 2011 Al Qaeda leader Ayman al-Zawahiri praised the “heroes” in Sinai who attacked the gas pipeline to Israel.

The jihadists, who see attacking Israel as their main mission, seek to exploit the Sinai’s strategic position and instability to inflame regional tension. By attacking Israel, they hope to provoke Israeli strikes on Egypt, thereby inflaming the Egyptian public and forcing Egyptian authorities into a military response. Their objective is to set off a chain reaction, triggering tension, strife and even war. In so doing, they hope to destroy the thirty-year peace between Egypt and Israel.

THE REMOVAL of Egypt’s first Islamist president in July breathed new life into jihadi elements in Sinai and elsewhere in Egypt. The weeks immediately following Morsi’s ouster saw a major spike in deadly attacks on both civilian and military targets in Sinai, while calls for jihad and the black flag of Al Qaeda became common features of pro-Morsi rallies across Egypt. After fifty Brotherhood protesters were killed by the army on July 8, one speaker in Cairo declared, “The era of peace has ended. If the army attacks us we will attack back. We say to the Egyptian army that the day might yet come when we tell it to leave Sinai.” While there is no clear evidence of any operational ties with the Brotherhood, the nearly daily attacks in the Sinai are looking increasingly like a low-level insurgency.

Beyond the risk of direct attacks, for years Sinai has been a concern to Israel because it is a source of, and path for, weapons, explosives and fighters going to and from Gaza. A 2012 State Department report found that the northern Sinai had become “a base for smuggling arms and explosives into Gaza, as well as a transit point for Palestinian extremists.” Israeli intelligence contends that weapons looted from Muammar el-Qaddafi’s arsenals in Libya and from the Sudan—including antitank and antiaircraft missiles as well as long-range rockets—pass through Sinai en route to Gaza.

These weapons could fundamentally change the threat to Israel from militant groups in Gaza. While Hamas has long been Israel’s enemy, historically it has been poorly armed, and most of its rockets have had little accuracy or range. But Hamas’s ability to send fighters in and out of Gaza for additional training in Lebanon and Iran also makes the organization more formidable. In addition, Sinai-based militants have entered Gaza to fight Israel. Many of the worst networks of jihadists and criminals overlap both Gaza and Sinai. During Israel’s eight-day Operation Pillar of Defense in Gaza in November 2012, Islamist organizations in Egypt sent money, weapons and fighters to oppose “the enemy of God.” As Israel regularly clashes with Hamas, anything that increases Hamas’s military strength is viewed as a grave threat.

Israel has tried to meet the threat from Sinai as it has met past cross-border threats: by employing a mix of diplomacy, threats, punishments, stepped-up intelligence and defenses. Israel’s preferred approach is to push Egypt to solve the Sinai problem. This has worked only fitfully at best. Senior Israeli defense official Amos Gilad contends: “There is constant and in-depth dialogue with the Egyptians.” Israel, however, is leery of high-profile efforts or coercion, fearing that it would put the Egyptian government in a corner and, given Israel’s deep unpopularity in Egypt and the political uncertainty there, lead any regime to turn against Israel to curry favor with the Egyptian people.

Because neither Egypt nor Hamas can control Sinai, Israel has fallen back on improved intelligence gathering and defenses. Israel’s intelligence networks in Sinai were weak under the former regime of Hosni Mubarak; they relied on the Egyptian regime to exercise control and thus didn’t need a robust capability of their own. Although Israel’s networks have improved, it is difficult to gain a comprehensive intelligence picture on all the small groups in the Sinai and thus anticipate all attacks. Since 2010, Israel has built more than a hundred miles of fence along the Israeli-Egyptian border from Gaza to just north of Eilat. Sixteen feet high, the fence uses cameras, radar devices and other means of detecting infiltration by Sinai-based smugglers and militants. It also serves as a means of barring illegal migrants from entering Israel from Sudan and Eritrea.

Although this fence suppresses some infiltration, the threat to Israel is not just from cross-border attacks. As Prime Minister Benjamin Netanyahu conceded, “We are building a very impressive security fence, but it doesn’t block rockets.” For rockets, he added, “We will hit those who come to hurt us and we will also hit those who send them.” Such talk sounds tough, but in practice it is hard to implement. Striking directly at groups in Sinai would violate Egypt’s sovereignty and risk inflaming Egyptian nationalism—exactly the sort of passions the jihadists want to generate. And hitting Hamas in Gaza does little to control violence from jihadists in Sinai, many of whom are also critical of Hamas. The jihadists reject the concessions Hamas has made in the name of governance, being particularly critical of its regular cease-fires with Israel and its failure to Islamicize Gaza fully.

Threats and punishments have worked with Gaza to some degree, however. Israel regularly strikes a range of sites in Gaza to put pressure on the Hamas regime, particularly after a rocket or terrorist attack. At times, as in Operations Cast Lead (2008–2009) and Pillar of Defense, the military punishment is massive, leading to widespread devastation in the Strip. More quietly, but more importantly for ordinary Gazans, Israel also maintains a host of severe restrictions on trade and travel to and from Gaza as well as on energy supplies entering the Strip. Since September 2007, Israel’s stated policy has been to allow in just enough to prevent a humanitarian crisis, while making daily life difficult and normal economic development impossible.

According to a statement issued by Israel’s security cabinet shortly after Hamas took control of the Gaza Strip:

Additional sanctions will be placed on the Hamas regime in order to restrict the passage of various goods to the Gaza Strip and reduce the supply of fuel and electricity. Restrictions will also be placed on the movement of people to and from the Gaza Strip. The sanctions will be enacted following a legal examination, while taking into account both the humanitarian aspects relevant to the Gaza Strip and the intention to avoid a humanitarian crisis.

In addition to restricting what goes into Gaza, Israel’s blockade has also meant a virtual ban on exports from the impoverished Strip; in all of 2012, a paltry 210 truckloads of goods made their way out of Gaza, compared with more than 5,290 in 2006 and 15,255 in 2000.

Israeli coercion has limited attacks from Gaza because Hamas is capable of policing itself and, to some degree, other groups in Gaza. But it is far less likely to work in the Sinai because, while Hamas exploits the Sinai, it does not control it. Hamas has cracked down on these groups in Gaza, at times harshly and bloodily, but it cannot do so in Sinai.

BEYOND EGYPT’S risk of a clash with Israel, Egyptians themselves are paying a heavy price for Sinai-based terrorism. Years of neglect by successive Egyptian governments, along with a harsh and mountainous terrain, have made the impoverished Sinai an ideal breeding ground for extremist elements. A series of spectacular terror attacks on popular tourist destinations in the Sinai between 2004 and 2006 left some 150 Egyptians and foreigners dead and hundreds more wounded. It also dealt a major blow to Egypt’s tourist-dependent economy.

The erosion of law and order that has plagued Egypt since Mubarak’s fall has only compounded the growing security vacuum in the Sinai. Since February 2011, the security checkpoint in El Arish, near the Gaza border in North Sinai, has been attacked at least thirty-nine times, while the natural-gas pipeline to Israel and Jordan has been bombed no fewer than fifteen times. Attacks on Egyptian security forces and even multinational forces stationed in the Sinai have become routine. The deadliest attack occurred in August 2012 when armed militants ambushed an Egyptian military outpost near the Egypt-Gaza-Israel triborder area; they killed sixteen soldiers and commandeered two armored vehicles. In May 2013, gunmen abducted seven Egyptian police officers in northern Sinai. Although the kidnapped officers have since been released, the incident demonstrated that large swaths of Sinai territory remain outside the control of Egyptian authorities.

Two overriding interests guide Egyptian responses to Sinai: maintaining stability and safeguarding Egyptian sovereignty. Egyptian authorities have cracked down periodically on jihadist militants as well as smuggling networks in the Sinai-Gaza arena, but they are equally worried about the prospect of unilateral Israeli actions in the Sinai. Egyptians also have long feared that Israel seeks to permanently push Gaza, demographically and politically, onto Egypt. This fear feeds into other goals of the Egyptian government, including the promotion of Hamas-Fatah reconciliation and restoration of Egypt’s regional prestige and leadership role.

Egypt’s determination to control the situation in the Sinai-Gaza arena was demonstrated last November when Egyptian authorities brokered a cease-fire agreement that ended eight days of fighting between Hamas and Israel, as well as intensified operations against Sinai jihadi elements and Gaza tunnels.

Long-term calm in Gaza, however, requires more than just an arrangement between Hamas and Israel and Egyptian security operations along the border; it also requires political arrangements between Egypt and Israel, and between Hamas and Fatah. So long as Hamas continues to operate as a free agent, outside the authority of the PA, it will remain unpredictable and hence a potential threat, as well as vulnerable to threats by even more radical groups. Consequently, internal Palestinian reconciliation, while still shunned by Israel and the United States, is in many ways a matter of national security for Egypt.

Yet political rivalries and uncertainty complicate any Egyptian approach. While security matters in the Sinai have long been mainly the purview of the military establishment and intelligence services and, to a lesser extent, the Interior Ministry, Morsi’s Brotherhood-led civilian government did play at least a limited role as last November’s Gaza cease-fire demonstrates. In fact, in the lead-up to his ouster, some reports indicate Morsi frequently clashed with his military commanders over Sinai and Gaza policy. Preferring dialogue over confrontation, Morsi repeatedly ordered the military to halt planned operations against jihadi militants believed to be involved in the abduction of Egyptian police officers in May. The military was also suspicious of Morsi’s relationship with Hamas and resisted his entreaties to improve relations with Hamas. In response to the spike in violent attacks following Morsi’s ouster, the military intensified operations in northern Sinai, requesting and receiving Israel’s approval to increase its troop deployment in the area. Under Mubarak, Egypt’s notoriously corrupt internal-security services treated Sinai residents with more contempt and brutality than they did the rest of the population. Consequently, after Mubarak’s fall, Egypt’s as-yet-unreformed police force became a frequent target of Sinai-based militants and was less eager to police the Sinai than the major population centers to the west. The military, meanwhile, although it values Egypt’s security ties to Israel and places a premium on internal stability, has neither the desire nor the capacity to police the Sinai—or, for that matter, any other part of Egypt. In the wake of Morsi’s overthrow, deadly attacks on police and other security personnel became an almost-daily occurrence, while Egypt’s previously embattled police force resumed its prerevolutionary levels of brutality. The current wave of violence has reinforced Egyptian authorities’ traditional security-focused approach to dealing with the Sinai, while neglecting the deeper economic and developmental problems that afflict the troubled region. For years the United States has offered millions in development aid for the Sinai, although Egyptian authorities have yet to decide whether or not even to accept it.

SINAI INSTABILITY has been both an asset and a liability for the Gaza Strip’s Hamas rulers. Since the closure of Gaza’s borders by Israel in 2007, the tiny enclave has relied on the elaborate network of tunnels constructed beneath the Sinai-Gaza border for the smuggling of basic goods as well as weapons, most of which are transferred to Gaza via the Sinai. As one Israeli security analyst put it, “Whatever isn’t allowed to move above ground will find its way below it.” Tunnels beneath the Gaza-Egypt border have existed since at least the 1980s, but were limited mostly to the smuggling of contraband such as cocaine and hashish. After Hamas’s takeover of Gaza and the imposition of the Israeli blockade in the latter half of 2007, however, the tunnel network expanded greatly. Hamas has used the tunnels to smuggle in weapons and to smuggle out fighters for training. However, most of what is smuggled into Gaza through the tunnels are civilian goods, including building materials and basic consumer goods that are scarce or unavailable due to the Israeli-imposed blockade.

At its peak in mid-2010, Gaza’s illicit trade network consisted of some thousand tunnels funneling more than four thousand different types of products, both consumer goods and contraband, into Gaza. But things changed after the flotilla incident of May 2010, in which Israeli commandos raided a Turkish vessel carrying civilian goods bound for Gaza and killed nine people aboard the ship. In response to the widespread criticism unleashed by that episode, Israel eased restrictions on imports into Gaza. As a result, 70–80 percent of Gaza’s tunnels were put out of commission. Moreover, Hamas taxes these tunnels, and Israel has largely tolerated them in order to ease some of the economic pressure on Gaza (and diplomatic pressure on Israel), thereby helping Hamas to consolidate its economic and military hold over Gaza while displacing Gaza’s legitimate economy. So long as these networks remain financially viable, they will continue to support smuggling and illicit networks in Sinai as well.

Hamas’s immediate priority is to maintain and strengthen its grip over the Gaza Strip. At a minimum, this requires meeting the basic needs of Gaza’s population. Having been relatively successful at restoring basic law and order, the Hamas regime has focused much of its energies on pushing back against the restrictions imposed on Gaza from the outside, whether by Israel or by Egypt. The results have been mixed. Hamas’s ultimate objective is to see an end to the six-year-old Gaza blockade and the reopening of its borders. To this end, Hamas frequently tolerates (and occasionally engages in) rocket attacks against Israel, partly in order to bolster its “resistance” credentials and partly to challenge its containment. That was the case last November, when Israel’s eight-day offensive exacted a heavy price on Gaza in both military and human terms. But the cease-fire deal resulted in some limited but tangible improvements in the Gaza closure regime, such as the expansion of Gaza’s fishing zone from three to six nautical miles.

Hamas’s political ambitions go well beyond Gaza. In the short term it hopes to outgovern its Fatah rivals in the West Bank and ultimately to displace them. Since its formation in the late 1980s, Hamas’s position has gradually evolved from seeking to replace the traditional Palestinian leadership—initially embodied in the Palestine Liberation Organization (PLO) and since 1994 by the Palestinian Authority—to taking over these institutions. Such aims drove Hamas’s decision to participate in PA elections in 2006 after having boycotted all previous polls. Likewise, Hamas leaders now have set their sights on the PLO, the barely functional but traditional center of the Palestinian national movement. Although a shadow of its former self, the PLO remains the legal and political address of the Palestinian cause and is universally recognized as the sole legitimate representative of the Palestinian people, both inside and outside the occupied Palestinian territories.

It is this international legitimacy that Hamas desires. Although international attitudes toward Hamas have warmed somewhat in recent years, the movement is still shunned by most Western European states as well as the United States, to say nothing of Israel, and is once again on the defensive in the region. For the most part, the debate within Hamas, however, has not been about whether it will come to power but when and how—whether in the interim to share power with Fatah (via a reconciliation agreement) or simply to wait it out by banking on Fatah’s eventual collapse. In the absence of a credible peace process and with the Fatah faction in a perpetual state of disarray, the latter strategy had always served Hamas well. The fall of the Brotherhood in Egypt and its growing regional isolation, however, may force Hamas to reassess its options.

The loss of its Brotherhood allies in Egypt is an especially bitter pill for Hamas to swallow. Gaza’s borders have once again been closed, while the smuggling tunnels that are the lifeblood of both Gaza’s economy and Hamas rule have come under increasing attack by Egyptian security forces. Meanwhile, Gaza’s 1.7 million residents are growing impatient with Hamas’s increasing repression and the absence of a long-term plan for ending their predicament. As a result, reconciliation with Fatah, once the shock of Morsi’s loss has died down, may now be a more attractive option for Hamas.

Further, while Hamas does not control all the tunnel traffic, its reliance on tunnels was already beginning to backfire. Gaza has three times the population of Sinai (but less than 1 percent of its land area), and Gaza’s robust smuggling trade, including the influx of weapons and the promise of fast money, has helped to fuel the Sinai’s own illicit economy as well as increased violence. This growing incidence of attacks has prompted Egyptian security forces to crack down with increasing severity in recent months. They flooded dozens of tunnels beneath the Sinai-Gaza border in January and closed Gaza’s border crossings with Egypt in June. Egypt’s antitunnel activity and border restrictions intensified further following Morsi’s overthrow, leading to acute shortages in fuel and other basic necessities in Gaza. This combined with Hamas’s loss of its Brotherhood allies in Egypt feeds its willingness to renew rocket attacks on Israel.

Regardless, Hamas is keen to maintain its “resistance” credentials, notably its weapons and armed militias. This is so not only because much of its legitimacy has come from confronting Israel but also because it wishes to avoid the fate of its Fatah rivals in the West Bank, whose decision to cooperate with Israel left them open to allegations of being “Israel’s subcontractor.” Hamas is determined to avoid what it views as the fundamental mistakes of Fatah, which agreed to recognize Israel and abandon armed struggle without getting an end to the Israeli occupation. Parallels with the PA are reinforced by Hamas’s periodic crackdowns against more radical Salafi and jihadi elements in Gaza, mirroring Fatah’s treatment of Hamas in the West Bank. The growth of even more radical critics in Sinai and Gaza poses a political risk to Hamas and makes it more likely that Hamas will fall back on violence.

Among other things, this means the conditions laid out by the so-called quartet, comprised of the United States, European Union, Russia and the UN—that Hamas disarm, recognize Israel’s right to exist and abide by past agreements—are simply no longer viable. For one thing, demanding that Hamas unilaterally disarm while Israel continues to impose realities on the ground through force of arms, including a blockade on Gaza and an occupation in the West Bank, would be seen by most Palestinians as tantamount to surrender. Indeed, Hamas leaders are convinced, perhaps rightly, that were it not for its arms it would probably not have survived all these years.

ALTHOUGH RECENT developments in the Sinai-Gaza theater have clearly put Hamas on the defensive, they do not change the continued irrelevance of Mahmoud Abbas’s Palestinian Authority in Gaza. Not long after Hamas handily defeated his Fatah faction in the 2006 PA elections, Abbas’s Fatah forces were expelled from Gaza by Hamas in June 2007. Since then, Abbas has longed to return to Gaza and restore his credibility; without at least a nominal role in Gaza, Abbas cannot truly claim to speak for all Palestinians. The fact that Gaza, rather than the West Bank, has been the main driver of events on the Israeli-Palestinian front for nearly a decade—beginning with Israel’s unilateral “disengagement” from the Gaza Strip in 2005 and extending to last November’s miniwar between Hamas and Israel—has only compounded Abbas’s and the PA’s growing sense of marginalization.

Even though Gaza remains beyond the reach of Abbas and his PA, this has not insulated them from the fallout of events there. Ironically, events such as Operation Cast Lead, the Gaza flotilla disaster, controversies surrounding the so-called Goldstone report on military abuses in the 2008–2009 Gaza war, and Operation Pillar of Defense, while principally involving Hamas, proved particularly damaging to Abbas and Fatah. This was equally true of the most recent round of fighting in November 2012. Whereas Hamas emerged from the conflict militarily weakened but politically strengthened, earning the respect and sympathy of both Palestinians and Arabs across the region, the crisis served to highlight Abbas’s powerlessness and growing irrelevance.

Although the Brotherhood’s downfall in Egypt has improved Abbas’s prospects, it may not be sufficient given that expectations are so much higher for Abbas’s Fatah leadership than for the Hamas regime in Gaza. As the PA president and head of the PLO, Abbas remains (at least theoretically) the leader of all Palestinians, including those in Gaza and even in the diaspora. Thus, whereas outside Gaza Hamas must do little more than survive and claim it could do better if it had more power, Abbas’s leadership must do much more; in addition to delivering tangible improvements in the lives of West Bank Palestinians, Abbas is also expected to bring about an end to the Israeli occupation, establish an independent state with its capital in Jerusalem and find an equitable solution to the Palestinian refugee problem. Indeed, worsening conditions in Gaza, far from enhancing the position of Abbas and Fatah, as many U.S. policy makers have believed, actually erode the PLO’s overall standing in the eyes of Palestinians. It is worth noting that the reverse is decidedly not the case; failures in the West Bank do not hurt, and usually help, Hamas.

Given its interconnectedness with other issues, any solution to the Sinai problem involves tradeoffs. Egyptian, Palestinian and Israeli interests all are involved, and of course the militants in Sinai also will have their say. Different options involve working more with Hamas to solve the problem, encouraging the Palestinians as a whole to take action via a unity deal and providing more incentives for Egypt to act.

One potential approach to Sinai is to work through Hamas and Gaza. But can this be done? Hamas now is at a crossroads, holding on to “resistance” while trying to gain recognition as a credible political actor and a legitimate government. The tension between these two goals can be increased by allowing Hamas to gain further credibility and legitimacy through more diplomatic recognition and a chance to improve Gaza’s economy in exchange for rejecting violence. Hamas would not disarm or recognize Israel, but it would stop its own attacks and use its influence to hinder others from doing so, whether in Gaza or through its Sinai networks.

This approach carries two risks—one obvious, the other more subtle. The obvious risk is that Hamas may not moderate. It could use any respite to better arm itself and otherwise make itself more formidable. Yet such an approach would jeopardize the diplomatic gains Hamas has made in recent years and decrease its popularity among ordinary Palestinians—very real costs. In any event, the military balance between Hamas and Israel would remain overwhelmingly in favor of Israel.

The more subtle risk is that the policy succeeds in making Hamas emphasize politics over violence and, in so doing, helps Hamas to supplant the West Bank leadership of Abbas with a more confrontational though less violent approach. The result would be a Hamas-led Palestinian polity whose leadership likely would be less interested in peace and generally more hostile to Israel.

One way—perhaps the only way—to mitigate these risks is to push for “normalizing” Hamas firmly within the framework of Palestinian reconciliation, the outlines of which were agreed to by Fatah and Hamas along with other Palestinian factions in April 2011. The deal, which has been reaffirmed and expanded in subsequent agreements, calls for the formation of an interim government comprised of independents and technocrats not affiliated with either Fatah or Hamas, but approved by both, thereby avoiding U.S. and international bans on dealing with Hamas members. Affording Hamas a formal role in the PA and the PLO would give Hamas what it seeks most, international recognition and legitimacy, but in a way that is both controlled and conditional. Implicit in the deal is a Hamas cease-fire with Israel and Hamas’s tacit acceptance of Abbas’s authority to negotiate with Israel—a huge potential gain for Israel.

All of this remains highly theoretical, however, as implementation of the Palestinian unity deal continues to be held up by both Hamas and Fatah, each of which seems to believe it can wait out the other. The internal stalemate is further buttressed by lingering differences over the fate of Hamas militias in Gaza and Fatah’s security cooperation with Israel in the West Bank, although these obstacles may not be insurmountable. A more inclusive and representative PLO may make it harder to reach a deal with Israel, but such a deal would be far more credible and durable. Conversely, a deal signed by a weak and noncredible Palestinian leadership is unlikely to hold, and Hamas and other spoilers could undermine it at will.

If the prospect of participating in (and perhaps ultimately controlling) official Palestinian institutions is not enough to induce Hamas to go along, more immediate practical realities might. As noted previously, the Gaza blockade continues to pose a challenge from both the Egyptian and Israeli sides of the border. Since neither Israel nor Egypt trusts Hamas to police the border, reopening Gaza’s border crossings will require a return of Abbas’s Palestinian Authority there. Yet since Abbas has vowed never to return to Gaza “on the back of an Israeli tank,” there is no realistic way for the PA to return to Gaza without Hamas’s permission, which can only happen in the context of internal reconciliation. Meanwhile, the current security vacuum in Sinai, which has exposed Hamas’s vulnerability, particularly vis-à-vis Egypt, presents an opportunity for Abbas that he is keen to exploit. With Hamas now weakened by events in Egypt, this may be the most opportune moment to push reconciliation on terms more favorable to Abbas and Fatah.

More can be done from the Egyptian side of the border as well. Restrictions on Egypt’s ability to deploy in the Sinai, outlined in the security annex to the Camp David accords, limit the numbers and types of forces Egyptians may deploy there. Such restrictions are seen across the board—by the Egyptian military, Islamists and secular political groups—as an affront to Egyptian sovereignty and national pride. Moreover, they are often cited as a serious challenge to Egypt’s ability to deal effectively with the growing threats in the Sinai. Although Israel has resisted the idea of formal changes to the treaty, it has on several occasions allowed Egypt to increase its armed deployments in areas adjacent to the Gaza Strip, whether through separate agreements (such as after the 2005 Israeli “disengagement” from Gaza) or on an ad hoc basis.

Israelis note that troop allowances in the current treaty are sufficient to quell the unrest in the Sinai, and where they are not, Israel has allowed augmentations on a case-by-case basis. But this offers only a technical solution to what is essentially a political problem. Doing so would leave the Egyptian government and military open to allegations of being Israel’s lackey. So unless Egypt can find some political cover and portray the crackdown as part of a broader deal in which it extracted concessions from Israel, it will be politically difficult for it to marshal the necessary forces for a sustained period of time.

THE UNITED STATES also has interests in Sinai beyond America’s desire that its allies be free from violence and generally well governed. The return of the Sinai Peninsula to Egyptian sovereignty was central to the success of the American-brokered Egyptian-Israeli peace treaty, which in turn has formed the cornerstone of America’s diplomatic and security posture in the region for more than three decades. Some of the terrorist groups in Sinai loathe not only Israel and the Egyptian government but also the United States. In addition, instability in Sinai and radical politics there are potential sources of unrest in Egypt that could further complicate its already-troubled democratic transition. Most important, the United States wants to prevent any renewal of the Israeli-Egyptian conflict, even one that falls well short of outright war. Such a clash would put the United States in a difficult position between its closest Middle East ally and the most populated and influential Arab country—and one whose transition may influence the course of others in the region. A clash would place the U.S.-Israeli alliance in the spotlight, further discrediting Washington with many Egyptians and with Arabs in general.

The United States can play an important role in helping reduce instability emanating from the Sinai. Part of the role is continuing vigilance in the region to prevent any unrest from Sinai from escalating into a broader clash that would sour Egyptian-Israeli relations. The United States can also encourage Israel to allow a renegotiation of the annex to the Camp David accords. As discussed above, the treaty itself is not a serious limit to an Egyptian crackdown. However, by giving Egypt’s government and its military a political “win,” it increases their desire and ability to crack down in a sustained way.

The United States can also encourage Israel to explore options with Hamas that fall short of an all-out deal for either side but decrease the risk of violence and Hamas’s use of the Sinai as an outlet for its illicit networks. Gaining stability in the Sinai is vital for Israel’s security and relations with Egypt. And since the Sinai’s fate is intimately bound up with that of Gaza, further reducing the blockade of Gaza will also need to be on the agenda if Hamas is to make more concessions on stopping smuggling.

Finally, in the long run, U.S. policy toward Egypt should also include support for governance and development initiatives in the Sinai. Such steps will reap fruit only in the long term, but they will make various bilateral arrangements more likely to hold over time.

Daniel Byman is a professor at Georgetown University and the research director of the Saban Center for Middle East Policy at the Brookings Institution. Khaled Elgindy is a fellow at the Saban Center and previously served as an adviser to the Palestinian leadership in Ramallah. Follow them on Twitter at @dbyman and @elgindy.

Image: Flickr/Gigi Ibrahim. CC BY-SA 2.0.

Image: Pullquote: Increasing violence and instability in Sinai could complicate Egypt's already-troubled transition and raise the prospect of renewed large-scale conflict between Israel and Hamas.Essay Types: Essay