All eyes will be on Barack Obama at the G20 summit this week. Among the great and good, the dull and dreary, in London’s Docklands he will be the only superstar. But the young president knows that what is decided inside a gleaming tower block in Tel Aviv will have more bearing on whether his presidency is accounted a success or failure than this talking shop.

High in the defence ministry building Major-General Amos Gilad points to a photograph on his wall of three Israeli F-15 jets flying over the site of Auschwitz.

"I put it here to remind us of what happened and what may happen,” says the old fire-eater. The press claims he has been the real leader of the state for the past six months while the politicians have been out wooing the voters.

On his shelves one book holds pride of place. It is a story written in childhood by Gilad Shalit, an Israeli soldier kidnapped almost three years ago by Hamas, the Islamic militant group that controls the Gaza strip.

As Israel’s security and foreign policy chief, Gilad has been negotiating for Shalit’s release. He is prepared to free hundreds of Palestinian prisoners to secure the return of one soldier. The Hollywood myth of Saving Private Ryan is national policy here.

The spectre of an Iranian nuclear bomb is also never far from Gilad’s thoughts. Mahmoud Ahmadinejad, the Islamic republic’s Holocaust-denying president, has called for Israel to be wiped from the map.

Iran funds and arms Israel’s enemies to its immediate north and south: Hezbollah, the armed Shi’ite movement that dominates southern Lebanon, and Hamas in Gaza.

The clock is ticking on the clandestine Iranian nuclear programme. Despite a series of United Nations security council resolutions and mild western sanctions, the process of uranium enrichment to make a bomb will soon be complete.

The experts do not agree when that day will come — any time between nine months and three years is suggested – but come it will. Whatever Iran’s ultimate intentions, the Arab neighbourhood is as nervous as Israel of an Iranian bomb.

Egypt, Jordan, Saudi Arabia, Algeria and non-Arab Turkey could swiftly join a nuclear arms race . They fear Iran’s revolutionary support for Shi’ite populations in the region and its traditional ambitions in the Gulf as heir to Persian imperialism.

So far the Arab nations have been able to live with a balance of terror next door between India and Pakistan. Israel’s own nuclear arsenal is unwelcome but tolerable as it has not threatened their internal stability.

The danger to the rest of the world will be that the nuclear non-proliferation treaty, to which Iran is a signatory, will be in ruins.

The old hopes of atoms for peace will become atoms for war as unlovely regimes everywhere reach for the nuclear trigger. The doctrine of mutually assured destruction (Mad) kept the United States and the Soviet Union from blowing us all up and making the rubble bounce.

Whether Mad works among multiple hostile powers has never been put to the test. It’s an experiment we can do without. The crazy regime of nuclear-armed North Korea has already rattled its neighbours to breaking point.

The Americans have ruled out a pre-emptive strike on Iran for now but the Israeli air force has been on manoeuvres, conducting dummy bombing runs as far afield as the Strait of Gibraltar.

Such a course would be militarily hazardous – "it’s at the very outer limit of our capabilities” says a security source – and, because of the distance to the target and the dispersal of the Iranian nuclear programme, even a successful hit might only postpone the evil day.

Few Israeli politicians show any appetite for such a mission. They would far rather work with the United States and their European friends to stop it. Gilad, however, muses: "To delay the Iranian bomb is not a bad idea.”

As for the dangers, "in 1981 our intelligence agencies also advised against a strike on Iraq”.

That was when Saddam Hussein’s nuclear reactor at Osirak was levelled by an Israeli bombing raid. (I am meeting Gilad on a trip arranged by the British Israel Communications and Research Centre. The sabre-rattling is for my benefit.)

George Bush refused to give the nod to an Israeli raid on Iran, because retaliation against targets in Iraq, the Gulf and the West as well as Israel might follow.

Obama will be more reluctant still: the White House’s attempt to reach out to old enemies would be ruined. The president is not standing still as this danger beckons.

New US strategies are being applied at breakneck speed across the world – all the old verities are being challenged. This has profound implications for the Middle East: the problem child of the world is about to get a kindly but firm American uncle.

Obama’s most breathtaking stroke so far has been to offer reconciliation with the ayatollahs in an attempt to put an end to the 30-year quarrel between America and Iran.

In a message to mark the Persian new year he praised Iranian cultural achievements, dropped talk of regime change and reached out the hand of friendship.

The two countries have mutual interests in pacifying Afghanistan and Iraq. If Iran gains acceptance as a legitimate status quo power, will it cast off its revolutionary ambitions?

Ayatollah Ali Khamenei, Iran’s political and religious supreme leader, gave a generally dusty answer to Obama’s appeal. But it was significant that he, rather than Ahmadinejad, replied rapidly within 24 hours and conceded: "If America changes its behaviour, we will change ours.”

The new administration is also impatient for a two-state solution to the conflict of Jew and Arab. The last time I came here Israel was withdrawing settlers and soldiers from Gaza.

Since then there has been a violent split among the Palestinian factions, missile attacks on Israel and bloody retaliation in Gaza, and "Bibi” Netanyahu, a right-wing prime minister, is being installed in Jerusalem. This record is stuck. Obama wants to hear a new tune.

Democratic Israel will always have a firm friend in the United States. But some in the administration share the fundamental insight of Ariel Sharon, a former Israeli prime minister and super-hawk: there will soon be many more Palestinians than Israelis because of a higher birthrate.

Rather than dilute the Zionist nature of the state it is sensible to disengage from the occupied territories. A group of hard-nosed foreign policy realists in Washington last autumn produced a "bipartisan statement on US Middle East peacemaking” that was handed to Obama by his senior economic adviser Paul Volcker, a signatory.

The wise men called for an "intense American mediation in pursuit of a two-state solution . . . a more pragmatic approach to Hamas” and American command of a multinational force to keep the peace between Israel and Palestine.

George Mitchell, Obama’s Middle East envoy (who acted as an honest broker in Northern Ireland), and General Jim Jones, his national security adviser, are said to be highly sympathetic.

Obama is taking out insurance if his policy fails. His overtures to the Russians – I give up my anti-ballistic missiles in eastern Europe if you back me at the UN security council – could result in harsh new sanctions on Iran’s tottering economy should he be played for a sucker: Iran may spin out talks to buy time to get its bomb.

He also knows that the presidency of a naive pre-decessor, Jimmy Carter, was incinerated by playing with Persian fire. But as long as Washington’s optimism is tempered by an understanding that the Middle East is the dustbin of many an American initiative, it’s worth a try.

The president’s problem is that Jerusalem is working to a more urgent timetable. As Gilad sees it, the Iranian bomb is "an existential threat” and the point of no return is coming fast.

If he is prepared to go to such lengths to save one captured soldier, what will he not do to safeguard his nation? Obama must reassure Israel if he is to hold the ring.

The Sunday Times