As Colin Powell was unveiling America's new order for the region, Palestinian guerrillas in the West Bank fought the old one, writes Graham Usher from Jerusalem After nearly a month's absence two old realities returned to the Palestinian- Israel conflict on Tuesday: armed Palestinian resistance and failed US-led diplomacy. Most Palestinians will see both as victories of sorts in a season that has so far brought only defeat. The resistance came courtesy of a West Bank ambush claimed by Fatah, Hamas, Islamic Jihad and the Democratic Front for the Liberation of Palestine, though it bore all the hallmarks of Hizbullah in its south Lebanon heyday. On Tuesday afternoon a roadside bomb disabled a bus outside Emmanual, an orthodox settlement near Nablus. As guards and rescue workers tried to free the trapped passengers, three Palestinian guerrillas, dressed as Israeli soldiers, sprayed the bus with machine gun fire. Seven settlers were killed, including three from one family, and 15 wounded. The guerrillas fled into the hills, eventually tracked by the army to the neighbouring Kana valley, where one was killed in a ferocious gun battle early Wednesday morning. The ambush succeeded against an Israeli regimen in the West Bank that now includes the re-conquest of seven of the eight main Palestinian cities, more or less permanent curfew of 700,000 of their denizens, siege on 1.5 million more, 6,000 detained and penury for one out of every two. It managed, therefore, to blow a vast hole in Israeli army and government claims that they were at last winning the "war against Palestinian terrorism". In response Israel cranked up the war another notch, cancelling planned "alleviations" in the Palestinian cities and postponing a meeting between Israeli and Palestinian officials set for Wednesday. It also blamed Yasser Arafat and the Palestinian Authority for the ambush. The PA condemned the attack. Meanwhile, in New York, Colin Powell was trying to advance the president's "vision" for the Middle East in a meeting with representatives from the United Nations, European Union and Russia, the so-called Madrid Quartet. It boils down to a policy where all political progress is predicated on guaranteeing Israel's security and imposing change on regimes that fail to meet that measure. He received few takers. On the Israeli-US contention that Yasser Arafat must now be either removed, by-passed or "kicked upstairs" he was met with a consensus that it is for the people to decide their national leaders and no one else. "The UN still recognises Chairman Arafat, and we will continue to deal with him until the Palestinians decide otherwise," said Kofi Annan, backed by the Russian foreign minister, Igor Ivanov. Annan also disagreed with Powell and Israel's insistence that any return to a political process "begins with finding a more stable situation with respect to security". On the contrary, "even if the security track gains some traction, that would not work... unless we show some progress on the other [political and economic] tracks," said the UN secretary-general. The result was disagreement and almost certain stasis in any real diplomatic movement for the coming months. Despite EU pleas, US officials made it clear after the meeting they were in no rush to send the CIA to the region once again to "reform" the PA's disintegrated police forces, effectively granting Ariel Sharon time and space to consolidate Israel's military rule in the West Bank. Powell also reportedly unveiled a three-year plan of humanitarian and economic aid to the Palestinians that effectively bypasses the PA as a central authority by placing delivery in the hands of "international assistance organisations" such as the UN. This, too, fits in with Israel's future designs for the occupied territories far more than it does the reforming templates laid down by Europe, Russia and the Arabs. As for Palestinian elections next year -- and the need for a partial Israeli withdrawal from Palestinian towns and villages so that they can happen -- Powell said not a word. Neither did the EU, UN or Russia.