An excellent article. From Jerusalem and Peace:
There is no reason or justice in the international refusal to recognize Jerusalem as Israel's capital. Every nation has a right to determine its capital, even if the borders of that capital are destined to be the topic of negotiations.
In essence, the U.S., Europe, and other nations are acting as if the 1947 UN partition plan, which envisioned Jerusalem as an "international" enclave, is somehow still in force. This is a legally strange position, given that the last binding legal apportionment of this territory was made by the League of Nations, which decided that the entire area that became the British Mandate, including Jerusalem, was to become the Jewish National Home.
The UN partition plan, since it was passed by the General Assembly and not the Security Council, has no binding status, and is legally a "recommendation." In any case, the Arab-launched war, according to legal scholar and senior U.S. State Department official Eugene Rostow, "made the Partition Plan irrelevant." The constant litany of nonbinding UN resolutions that unilaterally define Judea and Samaria as "occupied Palestinian territory" have very questionable legal justification.
The policy of refusing to recognize Israeli sovereignty over any part of Jerusalem, far from encouraging a resolution to the problem, is harmful to the cause of peace. It has encouraged the Arab world, and particularly radical movements like Hamas, to fuel fantasies of destroying the Jewish state.
Jerusalem, after all, for both Jews and Arabs, symbolizes Israel as a whole. Jerusalem was the capital of the ancient Jewish state, the site of the First and Second Jewish Temples, and the center of Jewish yearning over two millennia of exile. It should be no surprise if many in the Arab world see success in denying Israel recognition in any part of Jerusalem as representing success in the campaign to deny Israel's right to exist.
The opposite policy - that of recognizing that Jerusalem is Israel's capital, even if its borders are disputed - would have a proportionately positive effect on the prospects for peace: it would be taken in the Muslim world as further international rejection of the goal of destroying Israel.