July 3, 2002 -- For many years, a psychological Rubicon had blocked any hope for achieving a genuine peace between Israelis and Palestinians. With his speech last week, President Bush has led American diplomacy across that Rubicon, and hope for a genuine peace has finally emerged.

For nearly a decade, the peace process was held hostage to an idea that has a long pedigree of failure: that strong leaders can make a strong peace. Far from seeing a Palestinian regime unfettered by the constraints imposed by democratic rule as endangering the peace process, some even considered such a regime essential for safeguarding it. As former Prime Minister Yitzhak Rabin so succinctly put it, the Palestinian Authority would fight terror unhindered by a Supreme Court, human rights organizations and all sorts of bleeding-heart liberals.

That things did not work out as planned is now clear to everyone. Arafat's Palestinian Authority used the power and resources given to it not to build a better future for Palestinians, but to construct an infrastructure of terror and indoctrinate an entire generation of Palestinians into a culture of death.

President Bush made clear that the source of the problem is the nature of the Palestinian regime, not this or that Palestinian leader.

Unfortunately, it is still widely believed that all that is necessary to get the peace process back on track is to convince him or some other Palestinian interlocutor that nothing will be gained through the use of terror. But with his speech last week, President Bush made clear that the source of the problem is the nature of the Palestinian regime, not this or that Palestinian leader.

The president's words point to a truth that many seem to have forgotten: that there is a fundamental difference between democratic leaders and dictators. Because democratic leaders are dependent on the will of the people, they strive to promote peace and prosperity, opting for war only as a last resort. By contrast, in dictatorships, external enemies become the dictator's lifeblood, enabling him to divert discontent with his own repressive rule.

Reared in the Soviet Union, I came to understand that international security and democracy are inextricably linked. President Bush's speech suggests he shares a similar vision. The question now facing policy makers, both in Israel and around the world, is how to translate this vision into a workable peace plan. Two months ago, I presented just such a plan to Prime Minister Ariel Sharon.

The first step would be the establishment of an international coordinating body. This organization, headed by the United States, and including those Arab states that recognize Israel, will be responsible for establishing a Palestinian Administrative Authority (PAA) to administer the areas under Palestinian control during a three-year transition period. Israel involvement in this process will be limited to a right to veto candidates to the PAA who have been connected to terrorist activities against Israel.

The PAA will be responsible for administering the day-to-day lives of the Palestinians in matters such as the economy, law enforcement and education. Israel will be responsible for security and freedom of passage in all of the West Bank, and will retain the right to set up transition zones and buffer zones to prevent the resurgence of terror activities.

The PAA will be expected to develop the infrastructure for Palestinian democratic life. This must include formulating new educational programs that inculcate values of peace rather than terror, securing freedom of political, social and religious association, and guaranteeing freedom of speech and freedom of the press. The distribution of international aid and assistance will be dependent on ensuring these freedoms.

The coordinating body will dismantle all Palestinian refugee camps, and a normal existence will be offered for those evacuated from the camps. Arab countries, with assistance from the United Nations, will finance this effort. An international fund will be established to create and finance industrial zones, infrastructure projects, and other economic activities in the PAA.

After a three-year transition period, free elections will be held in the areas administered by the PAA. Israel will then negotiate the terms of a permanent peace with the elected representatives of the Palestinian people.

In the climate of fear, hatred and death that Arafat has created, it will be difficult, if not impossible, to find leaders who dare to work openly for peace.

The plan outlined above recognizes that in the climate of fear, hatred and death that Arafat has created, it will be difficult, if not impossible, to find leaders who dare to work openly for peace. In order to enable such leaders to emerge and allow Palestinians to freely express their views in a democratic climate, a transition period is absolutely necessary. During this period, Palestinians can lay the foundations of democratic life and combat the effects of years of propaganda and incitement.

Just as Germany and Japan had to undergo a process of rehabilitation in order to rejoin the international community following World War II, so today Palestinian society must undergo a transformation.

I hope that we will not be sidetracked once again by accepting Arafat's phony promises of reform or legitimating his call for snap elections. This will only serve to perpetuate dictatorial rule that will preclude the possibility of peace. Everyone who genuinely wants peace in our region should now heed the president's call and work toward reforming Palestinian society. For only if the Palestinians are truly free can we hope to achieve peace and stability in the Middle East.

This article originally appeared in the Wall Street Journal.