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The past week may go down as a turning point in the search for Middle East peace -- a turn in the wrong direction. Efforts to re-launch peace talks encountered serious setbacks, and while some may be gloating over that, the result is not likely to be a breathing spell while everyone figures out where to go next, but a dangerous period of uncertainty and instability.

While peace envoy George Mitchell was spending another frustrating week in another failed effort to prod Israelis and Palestinians back to the peace table, President Obama confessed his year-old effort to restart the talks has been a failure. Neither side, he concluded, is ready to make the difficult decisions necessary to move toward peace.

It was a "well, duh," moment as the president acknowledged what has been obvious to everyone else for the past year.

"We overestimated our ability to persuade them ...[to] start engaging in meaningful conversation.... If we had anticipated some of these political problems on both sides earlier, we might not have raised expectations as high," Obama said.

Israeli papers reported the prime minister's office was "gloating" over the setback, confidently predicting the president would have no choice but to put the issue on the back burner for a while. That may please Israeli rejectionists, but it could be dangerous because there is no such thing as standing still in the Middle East.

One big question is what downgrading of the peace process will mean for already-strained relations between Washington and Jerusalem. There are many ways an administration can express displeasure: votes at the U.N., access to the latest military technology, intelligence sharing, high-level exchanges and the extent of strategic cooperation are a few.

Putting the peace process on indefinite hold until everyone is ready is very risky. "A deadlock will lead to another round of violence that will serve Hamas," predicted Defense Minister Ehud Barak.

Mitchell said the president remains "committed" to the peace process but "engaged" may be another matter. Since the top leaders can't get together, Mitchell has proposed low-level talks; observers in Jerusalem expect the issues will also be low-level.

Obama said Israel showed some willingness to modify its policies but was not ready for the "bold gestures" he considered essential. More rigid were the Palestinians, and Mitchell warned Abbas he must be more flexible if he wants talks to resume and expects U.S. help in the process.

Their rhetoric aside, neither Netanyahu nor Abbas has shown much enthusiasm for making peace. In the wake of Obama's expressed disappointment that neither is ready to make history-changing decisions, they have ratcheted up their finger pointing and name calling, in an effort to divert attention from their own responsibility.

Each side self-righteously insists it is ready to return to negotiations without any conditions, but the other is the real obstacle.

Top Palestinian negotiator Saeb Erekat said Abbas' demand for a total settlement freeze, plus construction in Jerusalem, "is not a Palestinian condition, it is an Israeli obligation."

And now there's a new Abbas demand: no more direct talks with the Israelis. Instead, he wants the Americans handle that for him.

A senior Israeli official declared, "The key to the resumption of talks is not with us but with the Palestinians." Unless you take exception to Netanyahu's latest demand for an Israeli presence on the Palestinian state's eastern border with Jordan, or that it recognize Israel as the Jewish homeland, or that Jerusalem is not on the table. This weekend Netanyahu used a tree-planting ceremony at a settlement to declare Israel intends to retain parts of the West Bank "for eternity."

Each side says it is anxious to get to the table but the other is holding it back with unreasonable demands. They're half right -- the part about unreasonable demands.

Both sides know their conditions are unacceptable to the other, and that's no accident.

President Obama was unusually candid about the failure of his Middle East peace initiative. One of his biggest mistakes that he didn't mention was his unwillingness to take his case directly to the Israeli people, to stand before the Knesset and spell out his vision for Middle East peace.

Both Abbas and Netanyahu want to preserve good relations with Washington, but are hobbled by their internal politics. Netanyahu's coalition depends for survival on a number of right-wing parties that oppose Palestinian statehood and are allied with the settler movement. Abbas' secular nationalist Fatah is locked in a fight for survival with the Islamist Hamas, which vows to destroy Israel, not make peace.

The administration knows it is dangerous to walk away from the peace process so Mitchell and others will drop in periodically to maintain the impression of U.S. involvement and to counter charges the peace process is dead.

Abbas and Netanyahu will keep talking about how much they want peace, how they're ready but for the other's intransigence, but the truth is they may be ready to talk the talk but not walk the walk to peace. And in the Middle East, motion without movement is a prescription for new violence.

Douglas Bloomfield is the former chief lobbyist for the American Israel Public Affairs Committee.