Do Palestinians, the Christian ones at least, believe in Santa Claus? “One hundred percent,” says local wholesaler Majed Zedan. “St. Nicholas, he used to live in Beit Jala!” But that was 1,600 years ago, in a time before Islam and the Israeli state. All that remains today of the original Father Christmas are ancient fragments of bone in a bullet-pocked church, while the Arab Christians who revere him – “the living stones around the Holy Places,” as they like to say–are fast disappearing.

According to historian Manuel Hassassian of Bethlehem University, about 22 percent of all the Arabs in Mandate Palestine under British rule in the 1920s were Christian. Now the figure is fewer than 1.8 per cent. They have emigrated to Europe and to the Americas, North and South. They have built other lives and communities in places like San Pedro Sula, Honduras, among the banana plantations. And those who remain in places like Beit Jala and Bethlehem wonder constantly how much longer they can hold out in the ancient streets and alleys, on the rocky hillsides and in the olive groves where Christ was born and lived, preached and died.

“I simply believe that we are under religious persecution,” says the Rev. Peter Madros, an acerbic Roman Catholic priest who teaches at the De La Salle School in Bethlehem. He blames Jewish ideologues, radical Muslims, and some American Protestants, too. “It’s a diabolic thing, to put it bluntly,” says Madros. “You have Zionism on the one hand, Islamism on the other, and so-called Christian Zionism on another.” All of those groups espouse, in his view, theocracies intolerant of the mainstream Christianity most Palestinians practice.

Through the last two years of Palestinian revolt, Israeli retaliation and reoccupation (backed up by the Christian Right in the United States), through the nightmares of terror and counter-terror, the emigration has grown so bad, says Madros, that “Bethlehem is a living necropolis.” And the scene around the Church of St. Nicholas in Beit Jala suggests why. During the early days of the uprising, Palestinian gunmen who were Muslims not from the immediate neighborhood started sniping at the Israeli settlement of Gilo, just across the valley inside the Israeli-declared boundaries of Jerusalem. The Israelis returned the fire-and then some - with artillery shattering the windows in the church, chipping away the stone in places, terrifying and driving out the residents of St. Nicholas Street.

Not only the Christians are leaving. Secular Muslims feel squeezed out, too. “We have a large number of Christians who have emigrated, but this does not mean there is not a large number of Muslims who have emigrated,” says Nuha Khoury, who works with the Lutheran Church in Bethlehem. “A study that was done recently shows that 140,000 people have left Palestine in the past two years since the intifada .” The difference is that while Muslims tend to go to Arab countries, Christians usually go to the United States, Canada and Australia, says Khoury. “And usually when you go to these countries , you never come back.”

Among those thinking of leaving today is Khader Abu Abarra, 44, who was once an activist with the Marxist-oriented Popular Front for the Liberation of Palestine. He spent years under arrest in Israel’s desert detention camps, and grew so notorious during his spells of freedom that the Israelis put out a murder warrant against him. Eventually cleared by Israel’s courts, he now says he has resigned from his party and hopes to go check out Australia, where his brother lives.

“One of the results of the Intifada is that it made the two streets- the Israeli and the Palestinian-shift toward the right,” says Abu Abarra, who now runs an olive-growers’ cooperative. For the Palestinians the shift is toward radical Muslim groups like Islamic Jihad and Hamas. For the Israelis, the shift means an increasing advocacy of “transfer,” or ethnic cleansing, to get Palestinians out of the occupied territories. “There is a kind of polarization between the two people,” says Abu Abarra. “This is one of the results of this war, this crazy war.” And because the Christians are a small and moderate community to begin with, they are the most vulnerable.

Nor have Palestinian leaders offered much consolation. Since 1987, during the first intifada, Yasir Arafat has faced the choice of fighting groups like Hamas, or finding ways to work with them. He’s taken the latter course, thus isolating Christians still further. “The inquisition which is dead and buried in Christendom is still alive in Islam,” says Father Madros, who is not given to understatement. And even for Arafat supporters, the corruption of Arafat’s regime has been a bitter disappointment. “It is not what we struggled 30 years to get, this kind of administration,” says Abu Abarra.

But the greatest problem in the Arab Christians’ daily lives remains the presence of Israeli troops in their streets, and even in their homes. Christian leaders in Bethlehem say their cultural centers have been attacked for no reason except to pressure them to leave. To be sure, some suicide bombers have come from the teeming refugee camps on the outskirts of town, and several wanted terrorists were holed up in the Church of the Nativity during a standoff with the military last April. But Nativity Square, now deserted, was never a den of conspiracy. The Lutheran Center that is under construction was not a terrorist barracks. And still the windows are shuttered.

“What occupation means is that you are at any moment of your life under somebody else’s thumb,” says Khoury, who lived for many years in Ann Arbor, Michigan. “You are not free to decide what your future is like, what the future of your children is like, if you can get out of your house at a certain moment or not. If you invest in a business–I mean, Americans understand business–what if you invest in a place and you know that at any moment this place can be destroyed? You won’t invest. But we are investing because we believe that this is the only way to go.”

Unfortunately, those who invest often lose. Wholesaler Majed Zedan so believed in St. Nick that he sank $100,000 cash in chocolate Santa Clauses and other Christmas baubles from Europe. He didn’t expect peace on earth this Christmas, to be sure, but he hoped for a livable ceasefire and good local sales. As Christmas Eve approaches, however, the Israeli Army shows no sign it will loosen its grip on Bethlehem for more than a very brief spell, and then under the guns of Israeli tanks. Arafat will not be allowed to attend services there, although that’s the least of concerns for most people in the town.

Israeli author Meron Benvinisti, a former deputy mayor of Jerusalem, is grimly ironic about the complacency of the Israeli public as that silent night approaches. “Placing a tank under the Christmas tree in Bethlehem’s Nativity Square–even ‘inconspicuously,’ in the Israeli Defense Force’s words–desecrates some universal value,” Benvenisti wrote in the liberal daily Ha’aretz. “One cannot escape the depressing thought that the tank in Nativity Square symbolizes a society whose violent reality has been emptied of moral sensitivity and cultural sophistication, and has been turned into an island, alienated from its geographical as well as spiritual environment.”

As the anniversary of Christ’s birth draws near, it is not just the Christians who are threatened in the Holy Land, it is the spirit of peace that is suffering, and dying.