Call me really naive, but why can't Palestinians living in Israel just be given citizenship and equal rights?
This is an extremely important question. I know this is a long post but please bear with me. To answer this question one must understand the most basic facts on the ground, which are only vaguely alluded to in mainstream American media.
The fact is that Israel, the West Bank, and Gaza, taken together, are composed of about 5.8 million Jews and 5.8 million Arabs. In a democracy, such demographics would result in a bi-national state of Arabs and Jews and the land would belong equally to all citizens. This would therefore result in "the destruction of Israel" as an explicitly Jewish state (e.g. the Star of David on the flag, or Israeli laws which privilege Jewish but not Arab immigration and citizenship, etc. would likely be voted down if half the voters were not Jewish). It would also go directly against the official platform of ruling Israeli political parties (see below) that ALL the land belongs to God's chosen ethnic group.
That is why many mainstream Israeli political parties (notably excluding conscientious objections from the Left) have something like this as part of their official platform:
The Israeli nation has a national and historic right to the whole of Israel [read: including Gaza and West Bank]. However, in order to maintain a Jewish majority, part of the Land of Israel must be given up to maintain a Jewish and democratic state. Israel shall remain a Jewish state and homeland. Jewish majority in Israel will be preserved by territorial concessions to Palestinians. -
Kadima Party of Ariel Sharon and Tzipi Livni. Largest party in the Knesset in 2009 and primary opposition to the current Likud govt.
Furthermore, how could Israeli settlers "fulfill their Zionist values" and conquer the West Bank (historic Judea and Samaria) if the non-Jewish residents of the West Bank were Israeli citizens with equal rights? This is another reason Palestinians cannot simply be given equal citizenship and rights. You may think I am using rhetorical language to misrepresent Israeli policy, but read for yourself the official platform of the Likud Party (the leader of the current Israeli govt.):
The Jewish communities in Judea, Samaria and Gaza are the realization of Zionist values. Settlement of the land is a clear expression of the unassailable right of the Jewish people to the Land of Israel and constitutes an important asset in the defense of the vital interests of the State of Israel. The Likud will continue to strengthen and develop these communities and will prevent their uprooting.-
Likud Party platform
This is one reason why Netanyahu et al. want Palestinians to do
more than recognizing Israel's existence and taking actions which respect its right to exist. They always ask the Palestinians to recognize Israel
as a Jewish state and its right to exist
as a Jewish state. Palestinians are understandably reluctant to do so because this is the principle which is used to justify everything that is done unfairly to them -- the denial of their rights and the taking of their land. (Where is "Israel"? According to the parties in power in the Israeli govt. "Israel" apparently includes the West Bank and Gaza and all of Jerusalem.)