Notwithstanding the positive Reservist's recommendations to enter into negotiations with the Palestinians, neither the Arabs nor the Jews were politically or psychologically prepared to entertain the idea. Neither King Hussein nor the Fattah section within the PLO would consider the idea. - Arafat singled it out for vitriolic condemnation. As for the Israelis, they were looking to the neighbouring Arab states to conclude a peace treaty. It was with Jordan that Israel had fought- not the Palestinian population on the West Bank and Gaza.
During Phase I of the Occupation, Israel failed to consider the indigenous Arab leadership as having the capacity to make a peace settlement. For Israel, her policy was directed towards negotiations and a peace treaty with the Arabs. With Israel refusing to deal with the local Palestinians, they naturally turned to the PLO for support. The PLO, in its turn, commenced its terrorist incursions against Israel from without.
Following the War, Israel somewhat surprised at the extent of its outcome, lacked any clear policy as to how to manage the "occupation." except for Jerusalem. The basic policy lines in fact were hammered out some years later in what was described as a policy of "benevolent occupation." The aim of the programme was to minimize Israeli intervention in the lives of Palestinians; to allow them to pursue their lives unmolested as long as they obeyed the law and did not defy the occupation. The Israeli government established a clear cut policy of reward and punishment; promising benefits to those who cooperated with the administration and sanctions against those who did not. Talks were held here and there with local leaders in an attempt to arrive at a tacit understanding of the "rules of the game," but an overall long-term policy was lacking.