While the government of Israel and Fateh trade barbs over settlement construction, Hamas is sprinting toward creating the first part of the Palestinian state in Gaza. Over the last couple of weeks Hamas and Israel have taken several "unilateral" steps that have not been reported as linked, but which most certainly are. Hamas first announced it had ordered the smaller militant groups such as Palestinian Islamic Jihad and PFLP to cease firing rockets on Israeli towns and had stepped up policing to curb the launching of rockets. It is no coincidence that, despite several border skirmishes Israel has obliged Hamas' tough approach by allowing first clothes and then wood and aluminum into the Gaza Strip for the first time in over three years. Now, Haaretz reports that Hamas has ordered the shuttering of underground smuggling tunnels between Egypt and the Gaza Strip. The tunnels, a desperate lifeline between the 1.5 million Gazans trapped by a joint Egyptian-Israeli siege and the outside world, will be shut only temporarily according to Hamas, as Israel and Egypt investigate a reported threat to kidnap Israelis in the Sinai.
These reports point to the fact that, despite the announced failure of indirect, Egyptian and German-mediated talks to lift the siege of Gaza in exchange for the release of captured Israeli soldier Gilad Shalit, negotiations between Hamas and the Israelis are ongoing. Regardless of whether their teams sit in different rooms and Egyptian diplomats run between them, Hamas and Israel are talking and working to improve the situation for their respective peoples in order to bolster the political ground both the Likud-led government and Hamas stand on. Ending the siege on Gaza, allowing Gazans more freedom to fish and farm, and secretly promising not to incinerate Hamas leaders from the air does not cost Israeli PM Benjamin Netanyahu any political capital, while allowing him to claim he stopped the rocket fire on Israel's southern communities due to his "tough" (more like opportunistic and pragmatic) approach toward Hamas. It is not certain, but if his dealing with Hamas free Shalit, he knows it would be a major victory over his political rivals and allow him more domestic wiggle room to deal with U.S. President Barack Obama. By (secretly) negotiating with Hamas, Netanyahu can reap all of the rewards without taking any of the risks normally associated with talking with Fateh. Obama will never seek to become involved, if he fails not a soul will blame him for an uptick in violence from Gaza (and he'll get to act tough by ordering more air strikes and ground incursions into Gaza), and he doesn't have to take on the settler block or the far-right members of his coalition.
True Israeli-Palestinian peace would certainly be a huge historic victory for any Israeli leader to affix his name to, but so few Israelis actually believe it will happen in the next few years, that Netanyahu may very well believe there's nothing to lose by not seriously pursuing it. If, however, he can bring quiet to Israel's southern front while holding Obama and Fateh at arms length, it would likely be enough of a victory to keep him in power for a while longer than his first round as Prime Minister.
As for Hamas' motivations to dance with Netanyahu, there are many. The seemingly random, unproductive violence against Israel by rocket fire no longer impresses either Gazans or the larger Palestinian community. Especially while loving in a world without basic building materials, the constituency that Hamas finds itself ruling wants a competent government, the ability to safely move around the Gaza Strip (and perhaps even to the outside world), and the staples of human life (food, water, electricity, and clothing) readily available at a price they can actually afford. Hamas after the Gaza War in December 2008 had begun meandering down the path of corruption and authoritarianism that plagued Fateh for decades and eventually led to its defeat by Hamas in the 2006 Palestinian elections. If Hamas could improve the lives of Palestinian in Gaza (and the movement does not need to contend with undermining influences to its authority like settlement expansion and Israeli checkpoints inside its territory), it could score a major victory against Fateh, proving that it can do more than carry the torch of Palestinian violent resistance. Hamas is taking a play out of Salam Fayyad's book and attempting to rally Palestinians around the movement by providing Gazans with concrete improvements to their daily lives.
Because the occupation of the West Bank is so pervasive and so entrenched in Israeli society, Hamas may be able to overcome the siege and take the first steps of creating a truly Palestinian state. The siege is certainly easier to overcome than an entrenched occupation and expanding settlements. With the PA gaining support in the Obama administration and the Fayyad Plan playing sweet music to Europe's ears, the Israeli government may believe now is the time to undermine Fateh and elevate Hamas in the Palestinian community.