In 1984, legislative elections in Israel resulted in the formation of a coalition government with Shimon Peres as Prime Minister.
In this alternate timeline, Prime Minister Peres expresses interest in the 1982 Reagan peace plan, which had been shelved after Menachem Begin, the PLO and Arab states rejected it. Reagan's plan called for joint Palestinian and Jordanian governance over the territories, an Israeli withdrawal in exchange for a peace agreement, and negotiations on the status of Jerusalem.
Despite his fragile unity government, Peres expresses his interest in the proposal to Reagan. However, he wants a peace treaty with Jordan. Reagan pressures King Hussein into talks with Peres.
To appease Menachem Begin and the right-wing bloc in the Knesset, Peres promises to keep Jerusalem undivided and keep the major settlement blocs. This does not satisfy them.
1985: Negotiations begin, though King Hussein is very hesitant, worried over how his Palestinian-majority population will react to peace with Israel, and is terrified over ending up like Sadat. He demands that any peace treaty include resolving the Palestinian refugee issue. Peres agrees. One member of Peres' coalition suggests that rather than Palestinian autonomy, Israel and Jordan split the West Bank between them. Peres suggests this to King Hussein, who accepts after long consideration.
King Hussein had been secretly worried about what woul happen when Israel was no longer guarding Jordan's border with a population it considere hostile, and was worried about attacks on his regime from the West Bank. With Jordan in the West Bank holding the Palestinians down, it could ensure its own security. However, Hussein was still worried about the possibility of another Black September, and drew guarantees from both Peres and Reagan of military support if such an event were to occur.
1986: Yitzhak Shamir becomes Prime Minister. He is hesitant to enter negotiations, but Peres threatens to resign, and Reagan presses him hard. Shamir reluctantly enters negotiations. Shimon Peres, now Foreign Minister, does his best to keep the peace talks alive. The peace process is saved when Peres mediates an agreement between Shamir and Hussein over the status of Jerusalem and holy sites. Negotiations are then opened on the Palestinian refugee issue. Peres is doing his best to keep Shamir from having to talk about what he hates most: territorial compromise. Peres mediates talks between Shamir and Hussein on the refugee issue, and a solution is found that is acceptable to both sides. Shamir then opens talks on borders, though only minor progress is made here.
1987: With elections coming up, Peres finds a way to coverltly leak the news that secret peace negotiations have been taking place to the Israeli people. The news that they are stalled by Shamir's policies is also released. There is joy in Israel and anger throughout the Arab world. The PLO offers a bounty for King Hussein's death. However, President Bush persuades Hussein to stay in the talks.
1988: Elections take place. The Israeli public, extatic over the prospect of peace with another Arab state, overwhelmingly vote for Alignment. Shimon Peres is again Prime Minister, and with an overwhelming left-wing majority in the Knesset and cabinet, he has plenty of room to maneuver. The talks quickly progress.
1989: Peres and Hussein reach agreements on borders. Peres asks Egypt to negotiate over the future of Gaza, but the Egyptians refuse. They see Gaza as a potential source of Islamism, and don't want to exten their territory into including Hamas. However, Peres sees no future for the 8,000 settlers in Gaza among 1 million Palestinians (He said this in an interview about the 2005 Gaza disengagement). Peres decides to withdraw from the Gaza Strip, and let the Palestinians run their own affairs there.
1990: Israel and Jordan sign a peace agreement. The people of both countries approve it in referendums, though there are questions over the fairness of the Jordanian referendum. The agreement stipulates that:
* Jordan will take 96% of the West Bank. Israel will take the rest, which includes the major settlement blocs, the high ground that overlooks the Tel Aviv metropolitan area, and a small portion of the Jordan Valley.
* Israel will pay compensation to all Palestinian refugees who actually lost their homes and property. Only people who were actually displaced and who actually lost their homes and property will be compensated. Israeli courts will handle the claims. Israel will accept 20,000 refugees as citizens. Jordan will grant all of its Palestinian refugees citizenship, and resettle the residents of refugee camps on both banks of the Jordan River.
* Jerusalem will remain the undivided capital of Israel, but the Jordanian waqf will continue to govern the Temple Mount. Palestinians are to be allowed into the city to pray on a regular basis.
* The Cave of the Patriarchs in Hebron and Joseph's Tomb near Nablus will remain open to Jewish prayer. Jewish worshippers will have to schedule their visits ahead of time, and will receive Jordanian police protection.
* Israel and Jordan will mutually recognize each other and establish full diplomatic and economic relations.
* Israel and Jordan will jointly control the West Bank acquifers.
* The non-West Bank border between Israel and Jordan is the Jordan River.
* Both countries will cooperate in security and law enforcement fields.
The situation ends up being almost exactly like the one today, except without the Palestinian Authority, the Quartet on the Middle East, and the peacemaking adventures of Clinton, Bush and Obama. Jordan firmly suppresses Hamas and Islamist activities in the West Bank. Hamas fills in the power vaccum and takes control following Israel's withdrawal from Gaza. Israel shifts attention away from the West Bank. Syria and Lebanon are now Israel's main strategic priorities.
Prime Minister Shimon Peres is assassinated by right-wing extremist Yigal Amir, who opposed giving biblical land to Jordan. Due to the Israeli public's increased frustration with terrorism from Gaza, right-wing hardliner Benjamin Netanyahu is elected to take his place.