The ongoing conflict with the Palestinians poses more of an existential danger to Israel than Iran’s renegade nuclear program, former Shin-Bet director Yuval Diskin warned Wednesday night. The comments were later roundly dismissed by sources close to Prime Minister Benjamin Netanyahu.

“The alternative to the vision of a two-state solution is one state,” Diskin said. “In a situation like this, the vision of a democratic Jewish state will disappear. This is perhaps the last opportunity to reach a two state solution. The Geneva Initiative provides the basis for an agreement.

“We cannot live in a single state between the Mediterranean Sea and the Jordan River and we cannot relate to the conflict as shrapnel in the buttocks, as one of our ministers did,” he added, alluding to widely publicized comments made by Economics and Trade Minister Naftali Bennett (Jewish Home) in June.

“The question will be who is the shrapnel and who is the buttocks,” he quipped.

Diskin was speaking at a conference marking the 10th anniversary of the Geneva Initiative, a non-binding model for a permanent-status agreement that was crafted in 2003 based on past international resolutions. Among its architects were former Israeli minister and negotiator Yossi Beilin and former Palestinian minister Yasser Abed Rabbo. The draft garnered significant international support, but was never ratified by either the Israelis or the Palestinians. 

Diskin criticized the way the government has handled the most recent round of negotiations and warned that the longer the conflict persists, the harder it would be to find a solution. ”The implications of a lack of a solution to the Israeli-Palestinian conflict are more existential than the Iranian nuclear [program],” he said, noting that the current state of affairs in the West Bank was like a powder keg.

“It does not seem as if the current government is trying to change the trend regarding the settlement enterprise,” he said, in a jab at Netanyahu. “Our friends in the world are giving up on the prospect of a two-states-for-two-nations solution. There is tremendous frustration in the West Bank. The Palestinians feel that their state is being stolen from them. Soon the Palestinian masses will feel that there is no future, only a bad past.

“We must take into account the relationship between the Palestinians and their Arab-Israeli brethren,” he continued. “The concentration of fumes is so high that a little spark could lead to a big explosion.”

Diskin, a longtime critic of Netanyahu’s policies, called for the replacement of the current Israeli government with “a new coalition based on parties that support two states for two peoples.” He asserted that due to infighting, Netanyahu’s coalition had wasted a tremendous opportunity to inject hope into the peace process when it chose to forgo a settlement construction freeze in favor of a prisoner release.

“Two gestures can immediately strengthen hope and confidence between the two sides,” he said. “The first is to freeze all construction in the settlements. This is the more important gesture that could give the feeling that something is happening.

“I object in principle to the release of prisoners under extortion or threats. [That said] I am of the opinion, painfully, that a peace agreement justifies even the release of prisoners, done correctly, and only in the final stages,” he said. “Unfortunately, the cynical and nauseating political deal concocted to avoid freezing settlement construction was done at too early a stage in the negotiations and therefore angered many Israelis, and rightly so.”

While Diskin stressed the immediate need for a permanent deal with the Palestinians, he said it would very hard for the current leaderships to come to an agreement because there is no trust between them, and he noted that any deal would likely be short-lived without backing from regional players.

It “would have a very low chance of long-term survival without a regional framework that included at least Egypt and Jordan,” he said. “There are also other stakeholders… A resolution of the Israel-Palestinian conflict could be an opportunity for historic rapprochement between Israel and Saudi Arabia, the Gulf states and even Turkey.

“Improved relations between the US and Egypt, which have cooled recently, are critical to the Israel-Palstinian peace process,” he added. “Mahmoud Abbas needs support from the Arab states in order to make historic decisions.”

Sources close to Netanyahu dismissed Diskin’s comments, saying that “Anyone who thinks the Palestinian threat is larger that the threat of a nuclear weapon in the hands of Iran, which has made it its goal to destroy the State of Israel, is cut off from reality and lacks any strategic perspective.”

The sources passed off the statements as being motivated by Diskin’s “personal frustration” at being passed over for the role of Mossad chief.

Diskin’s comments came as US Secretary of State John Kerry arrived in Israel to present the outlines of a West Bank security plan in meetings with Israeli and Palestinian leaders. US diplomatic officials said Kerry and his security adviser, retired Gen. John Allen, have been working on security issues in hopes of breaking the deadlock. They believe the absence of any concrete plans so far is a main reason for the lack of progress.

Israeli and Palestinian officials declined comment on Kerry’s security plan, saying they had not yet seen any details.

Mohammed Ishtayeh, a former Palestinian negotiator, said Wednesday that wide gaps make a peace deal between Israel and the Palestinians impossible. Ishtayeh, a senior aide to Palestinian Authority President Mahmoud Abbas who quit the Palestinian negotiating team a month ago over Israeli settlement construction, said he believed US mediation was “unbalanced” in favor of Israel.

The Associated Press contributed to this report.