A plan to roll back the Israeli occupation of the West Bank and create the basis for a functioning Palestinian state was unveiled by Tony Blair yesterday, almost a year after he became the international community’s Middle East envoy.

It involves the creation of a Palestinian security and economic free zone around the northern West Bank town of Jenin, where Palestinian security forces would take charge, easing freedom of movement and allowing significant investment in infrastructure projects, including an industrial park near the impoverished town of about 35,000 inhabitants.

The plan would also involve the removal of four strategic checkpoints across the West Bank that do not lead directly into Israel, and changes to eight more that would allow traders and workers freer access to markets.

Mr Blair, now the head of the so-called Middle East Quartet, made up of the United States, European Union, United Nations and Russia, said: “This will be an important test over the coming months to show how progressively the occupation can be lifted.” The announcement of the new approach came as President Bush and other world leaders converged on Jerusalem to join celebrations for Israel’s 60th anniversary. It also foreshadows an important conference for private investors in the Palestinian sector to be held in Bethlehem this month.

Mr Blair, who had hoped for a more political role in the region, has been restricted by President Bush to developing the Palestinian economy for future statehood. Washington reserved the more prestigious role of steering the two sides to political settlement for itself. Those talks have produced few results and Mr Blair appeared keen to break the deadlock and forge his own plan to change the situation on the ground.

“I’ve said to people in my new job that it’s a mistake to think that politics can work without the reality on the ground,” Mr Blair said. After “arduous” negotiations, he said, he had secured the Israeli Defence Ministry’s backing for his ambitious project. “It’s natural there’s going to be enormous scepticism. It’s our job to make it happen.”

The first Israeli checkpoint, south of Hebron in the southern West Bank, is due to be removed by the end of this week, aides said, while the establishment of a free zone “larger in size than the Gaza Strip” would take place over the coming months.

Hundreds of Palestinian policemen, trained in Jordan under US auspices, have been drafted into Jenin in recent weeks and have already fought gun battles with local militant factions.

Mr Blair said that what distinguished his project from others that have tried and failed to cut through the complex social, political and security issues of the occupied West Bank, was that he intended to co-ordinate massive investment with increased security. He would also co-ordinate with Israel, which retains the right to send troops into the area if it detects an impending terrorist threat.

The package could be extended to the rest of the West Bank if it proved successful, Mr Blair said. He also announced plans to ease access to Bethlehem. Mr Blair said that in recent months tourism had reached pre-intifada levels in Christ’s birthplace. There are also plans for other industrial parks and for a new mobile telecoms company to invest in the area, a deal that could generate $350 million (£175 million) in licence fees for the Palestinian Authority.

Mr Blair wants to see much more development of schools and housing in Israeli-controlled areas of the West Bank, known as Area C, which make up 60 per cent of the West Bank, a territory cut up by Jewish settlements, army bases and checkpoints, where free access of Palestinians from one town to another is severely limited.

However, the plan will be highly susceptible to Palestinian attacks, with the Israeli army certain to clamp down again on its checkpoints if any of the hardline militant groups, such as Hamas and Islamic Jihad, try to send suicide bombers through roads where access has been eased.

It also does very little to improve dire conditions in the Gaza Strip, run by Hamas after a de facto civil war last year with its secular West Bank rival Fatah. An Egyptian envoy presented a proposal this week for a ceasefire between the Gaza factions and Israel to end the Israeli raids and Palestinian rocket fire, which killed an elderly Israeli woman on Monday.

Critics also cautioned that the Blair plan could deepen the political divide between Hamas and Fatah, bolstering the latter while isolating the Islamists further.

International aid groups say there is a looming humanitarian crisis in the Gaza Strip, which has been suffering from a crushing Israeli blockade since Hamas took control of the area.

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