A light breeze gently whips the Palestinian flags that fly over Rawabi. Sloping gently down the craggy green hills of Judea, with Nablus to the north, Ramallah to the south, and the Mediterranean coast visible to the west, this is the first planned city in Palestinian history.

Cranes pockmark the landscape as the commercial centre, schools and new houses — which will initially be home to 25,000 people, and ultimately 40,000 — rise against brilliant blue skies.

Barely 12 miles from Jerusalem, it is a city Israel should want as its neighbour. The brainchild of Palestinian-US entrepreneur Bashar Masri, Rawabi offers a source of optimism in a land where such an outlook is in short supply. Aiming to provide affordable housing for college-educated young professionals, and with hopes to become a magnet for the kind of hi-tech start-ups for which Israel is now famed, Rawabi must surely qualify as the exemplar of the “economic peace” that Benjamin Netanyahu promised to promote when he became prime minister five years ago.

Mr Masri understands well the importance of his focus on home ownership. “The Arab world has long catered to the rich,” he has argued. “It has ignored the majority, which is poor or middle-income… Home ownership is one of the most important issues for a young family to feel stable and secure.” And while he won’t give contracts to settlement businesses, Israeli companies are reported to make tens of millions of dollars each month from supplying raw materials to aid Rawabi’s construction: “It is a mistake to separate our economy from Israel’s… Projects like this bring our peoples closer together.”

Dov Weisglass, a lawyer and former aide to Ariel Sharon who provides advice to Mr Masri, believes that Rawabi contributes to “normalisation, co-existence and peace” with Israel. That is probably why the BDS movement and a smattering of right-wing settlers have opposed the project.

Now, though, Rawabi’s future is under threat. The first 600 residents who were due to move in this summer are still not in their homes. With the resultant cash-flow problems, work on the project has been halted several times.

At issue is the city’s lack of a stable water supply — despite a connection to Israeli water company Mekorot just 3km away in the Palestinian village of Umm Safa’. But a pipeline from Rawabi to that connection would, however, cross a narrow strip of Area C of the West Bank, which remains under Israel’s direct control.

In better days, the Joint Water Committee, established under Oslo to administer water projects in the West Bank, operated a purely technocratic approach to such questions. Today, the issue has become politicised. Israel says the PA has refused to allow the committee to meet for several years. The PA retorts that, beneath his apparent support for Rawabi, Mr Netanyahu is holding the project hostage: refusing to turn on the taps until the water committee approves supplies to nearby Israeli settlements.

Under pressure, given Rawabi’s high-profile international backing, Israel is understood to be considering resolving the stand-off by unilaterally switching on the water supply without JWC approval. It should do so without delay, for — politically — Rawabi offers Israel something priceless. Not just a model for co-existence, but a potentially subversive challenge to the conservative, outdated thinking which permeates the PA.
Its senior officials understand that threat and privately deride Rawabi as “an Uncle Tom project”, all the while knowing that its failure would offer them another stick with which to beat Israel on the international stage. Israel should not hand it to them.