Halfway through my interview with Khaled Mashaal, about an hour after Barack Obama’s Cairo speech, I realized that the leader of Hamas was calling the Israeli people, and their leaders, Israelis. That seemed new.

The usual term of art used by Islamic militants is "Zionists” or worse. A few days later in Iran, for example, I watched Iranian President Mahmoud Ahmadinejad say in a debate, "I don’t like to call them Israelis. Their leaders are so unclean that they could wash themselves in the cleanest waters and still be dirty.”

I asked Mashaal if his language implied that he accepted, de facto, a Jewish state called Israel.

"Don’t conclude this,” he said.

"These are the names they call themselves ... Once the Palestinians are enabled to have a sovereign state, then they can be asked whom they recognize.”

And yet, calling Israelis by the name they call themselves seemed a different sort of body language. The meaning of this new tone can be debated.

Part of it may be attributable to the terrible military defeat Hamas suffered in Gaza, a recognition, finally, that Israel is simply not going away.

Or Mashaal may be trying to present a more sympathetic face to contrast with Benjamin Netanyahu’s recalcitrant Likud government in Israel. Whatever the reason, it certainly seems time to reassess the West’s unwillingness to deal with Hamas. 

We met in a majlis on the second floor of the Hamas office in a quiet Damascus neighborhood. Mashaal, a handsome, soft-spoken man with salt-and-pepper hair, sat flanked by Palestinian and Hamas flags.

I asked about his reaction to the Obama speech. He was officially skeptical. He acknowledged the President’s new tone, but wanted to know what the Obama Administration would do to pressure the Israeli government to stop building settlements on Palestinian lands.

"The Americans have an abundance of experience in pressuring countries around the world,” he said.

"Why is it only in the case of Israel that America does not intervene?” He was, in fact, quietly intransigent across the board. I asked him what steps he was willing to take for peace.

"The initiative should come from the party with the resources. We have no resources,” he said and repeated a previous offer to negotiate an arrangement based on Israel’s withdrawing to pre-1967 borders. What about formal recognition of Israel?

"Who is more in need of recognition,” he asked, "Israel, which has a nuclear arsenal, great power and resources, or the Palestinian people? Which party should be given attention, the hangman or the victim, the oppressor or the oppressed?”

He also had no apologies for Hamas’ history of attacks directed against innocent Israelis, saying it was a matter of self-defense. Obviously, he wasn’t going to offer any concessions, publicly, to Obama.

In fact, Mashaal is facing more immediate problems than the final-status negotiations that Obama is proposing. Gaza, which Hamas controls, lies in ruins.

The border crossings are still sealed by Israel, except for some humanitarian goods, despite entreaties by Hillary Clinton, and the Gazans are unable to rebuild.

Mashaal is also enmeshed in his own local political struggle, against Fatah, the moderate Palestinian party, which receives the bulk of international donations for reconstruction and whose security forces are armed and trained by the U.S.

Hamas violently expelled Fatah from Gaza after its victory there in the 2006 elections; armed clashes between the groups have erupted again in recent weeks.

Before the Israelis negotiate with the Palestinians, the Palestinians obviously have to get their act together. So what are our options, given Mashaal’s refusal to yield on any of the demands made by Obama?

Hamas has some inconvenient facts in its favor: it exists, it remains strong in Gaza — as a direct consequence of the real social services it provides and its relative lack of corruption compared with Fatah — and it has a legitimate complaint.

The Israeli occupation of the West Bank is inhumane and outrageous.

Palestinians are imprisoned behind a barrier wall that does not conform to the 1967 lines; they are forced to endure hundreds of Israeli checkpoints and roadblocks whose purpose seems humiliation as much as security; their lands are slit by highways that only settlers are allowed to use; the settlements, populated by the most extreme Israelis, have doubled in size since the 1993 Oslo accords, gradually turning the Palestinian areas into Swiss-cheese cantons.

There will be no peace as long as this persists. And there will be no peace without Hamas as part of the process, as odious as its continuing embrace of violence against innocents may be. And there will be no process if the U.S. doesn’t speak to all sides.

In the past, the Middle East peacemakers, more often than not, have been the former terrorists — on both sides. Why not now?

TIME