The big news out of Obama’s speech on the Middle East should probably be his announcements about debt forgiveness and foreign investment. But the headlines are all about his commitment to the 1967 borders as the basis for peace negotiations. Obama should probably get some credit for this:

Mr. Obama’s aides and speechwriters labored on his remarks until the last hours before he delivered it in the stately Benjamin Franklin Dining Room on the eighth floor of the State Department.

Until the end, for example, his aides debated how Mr. Obama would address the conflict that has fueled Arab anger for decades: the division between Israelis and Palestinians. A senior administration official said that Mr. Obama’s advisers remained deeply divided over whether he should formally endorse Israel’s pre-1967 borders as the starting point for negotiations over a Palestinian state.

Here’s what Obama actually said:

So while the core issues of the conflict must be negotiated, the basis of those negotiations is clear: a viable Palestine, and a secure Israel. The United States believes that negotiations should result in two states, with permanent Palestinian borders with Israel, Jordan, and Egypt, and permanent Israeli borders with Palestine. The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps, so that secure and recognized borders are established for both states. The Palestinian people must have the right to govern themselves, and reach their potential, in a sovereign and contiguous state.

The important parts are that the basis of negotiations should be the 1967 lines and that, importantly, Palestine have a “contiguous’ state. That’s code for saying that the Israelis must dismantle some of their most established and populous settlements. Netanyahu, who arrives in Washington on Friday, immediately complained.

Prime Minister Netanyahu expects to hear [when he arrives in the States] a reaffirmation from President Obama of US commitments made to Israel in 2004, which were overwhelmingly supported by both Houses of Congress.

Among other things, those commitments relate to Israel not having to withdraw to the 1967 lines which are both indefensible and which would leave major Israeli population centres in Judea and Samaria beyond those lines.

Prime Minister Netanyahu will make clear that the defence of Israel requires an Israeli military presence along the Jordan River.

Overall, Obama pleased almost no one with his speech, although everyone had something to be happy about, including Israel.

The peace process remains in a stalemate, despite Obama’s rhetoric, but the lasting impact of his speech will probably come from the actual policy announcements. There’s a billion in loan forgiveness to Egypt coupled with a billion in loan guarantees. There’s a commitment to have the G-8 come up with economic stimulus plan for both Egypt and Tunisia. There’s the extension of the European Bank for Reconstruction and Development to the economies of new democracies in the Middle East and North Africa. There’s the announcement of a Trade and Investment Partnership Initiative in the Middle East and North Africa to promote trade between the region and the European Union.

What this looks like is an effort at economic development modeled on what we did with Eastern Europe after the fall of the Berlin Wall. For me, there are some perils involved, but this aligns our values and our self-interests in a way never before seen or attempted in the Middle East. It has real potential (over time) to reshape our relationships in a positive way and to actually help grow the economies of many Arab nations.

So, while the stuff about 1967-borders will get all the attention and probably lead nowhere, there was some important news in his speech, and a reason to be hopeful.