The dice come tumbling down as Jericho cashes in

The woman, a middle-aged Orthodox Jew, is transfixed. She is watching a 2in-high plastic horse on wheels trundling around a green toy track. Her eyes, full of a gambler's glee, are trained on her miniature rider in the hope that he will turn her flutter into a win.

The woman, a middle-aged Orthodox Jew, is transfixed. She is watching a 2in-high plastic horse on wheels trundling around a green toy track. Her eyes, full of a gambler's glee, are trained on her miniature rider in the hope that he will turn her flutter into a win.

The cavernous hall around her is crowded with other Israeli punters, working the blackjack tables, poring over roulette wheels, and plugging away at fruit machines. They have those dazed expressions that you find on the faces of Las Vegas gamblers who have spent too long among non-stop flashing lights, scented air, and the insane electronic burble of a big-time casino.

It is lunchtime on Friday, the first day of the weekend in Israel. But, though the gamblers are overwhelmingly Israeli, we are in Jericho on the West Bank, a town under the control of the Palestinians.

Two miles up the road is the Mount of Temptation, where Satan is said to have tried to corrupt Jesus during his 40 days in the wilderness. But down on the hot plain below, the sea of people inside the Oasis Casino prefer Oscar Wilde's dictum - that the only way to overcome temptation is to give in to it.

In a few hours' time, when the Jewish Sabbath begins, the crowds will become still bigger, and the casino's palm-lined car park - monitored by at least 25 security cameras - will fill up with the fancy four-wheel drives of the high-rollers from Tel Aviv. "It is incredible - we get 5,000 people here on a Friday night," says one security guard. Of these, a fair proportion will be Orthodox Jews.

Jericho was restored to Palestinian control by Israel in 1994. During the six-year Intifada, when it was still under occupation, very few Israelis went to the town because they feared being attacked. Jericho - which bills itself as the world's oldest city, and is at least 12,000 years old - saw little benefit from its rich history; it was a backwater, a cluster of concrete buildings and banana plantations on the stretch of baked desert between Jerusalem and Jordan, just north of the Dead Sea. It only had one shabby hotel.

But now, as Ehud Barak and Yasser Arafat slog away at Camp David, Jericho is being cited in Israel as a model of the co-operation that peace between Israelis and Palestinians could bring. Israel's liberal justice minister, Yossi Beilin - an influential voice in the pro-Barak camp, who had a key role in the 1993 Oslo accords - says it is evidence that Israel has nothing to fear by returning Arab lands it seized in 1967.

Certainly, Jericho's fortunes have improved in the past few years. Israelis flock to gamble at the Oasis, to visit the new $10m tourist centre - complete with its tourist shops whose Palestinians proprietors sell "Jerusalem - Israel" T-shirts - and to ride the new Swiss cable car that runs up the Mount of Temptation to a Greek Orthodox monastery embedded in the rocky mountainside.

The Palestinian Authority has a stake of at least 20 per cent in the Austrian-managed Oasis casino, which is reportedly making big profits. The Palestinian bureaucracy is dogged by corruption, and the residents of Jericho complain that they see little of the resulting funds. But, at least in theory, the Palestinians have acquired a painless way of raising extra revenue - by getting their foes, the Israelis, voluntarily to part with their cash at the roulette wheel. The prototype is the native Americans of the United States, whose reservation casinos have netted fortunes for impoverished tribes.

And yet it is a peculiar and limited kind of relationship. Almost all Palestinians (except those with foreign passports or friends in high places) are barred from visiting the Oasis, which stands - an island of modern consumer society pleasure - opposite a squalid refugee camp.

It is overlooked by a Jewish settlement, Vered Jericho, which is surrounded by barbed wire, and protected by a large, yellow electronic gate, manned by an Israeli soldier. Settlers from the community run a money-changing booth not far from the Oasis, selling dollars to gamblers.

But, mostly, the Israelis stick to the main thoroughfares in Jericho and tend to steer clear of Palestinian residential areas - just as they do when passing through Arab east Jerusalem, or travelling along specially built by-pass roads that link Jewish settlements on the West Bank.

"Where are all these Israelis you are talking about?" said Sala Barami, a Jericho resident, who was standing in a fly-blown butcher's shop in the main square. "They go to the casino - but they won't come here." And, crucially, the Israelis also still have an economic strangle-hold on the town, just as they will have over what ever Palestinian entity emerges from the peace negotiations. That much was made clear when violence broke out on the West Bank in May.

An Israeli woman and her two-year-old child were badly injured when their car was hit by a Molotov cocktail thrown by a Palestinian as they were driving through Jericho at night. Israel's response was to seal off the roads to the town for several days - starving the casino of almost all its clients.

It was another reminder to Palestinians that, no matter what grandiose or deceptive language is being used in the talks at Camp David - be it that of "autonomy" or "implied sovereignty" - Israel is the boss, and will remain so.