The decision by many Arab countries not to talk with Israel has complicated finding a solution over the decades, Minister of State for Foreign Affairs Anwar Gargash said, according to Abu Dhabi-based daily The National.
"Many, many years ago, when there was an Arab decision not to have contact with Israel, that was a very, very wrong decision, looking back," Gargash said, in unusually candid remarks.
"Because clearly, you have to really dissect and divide between having a political issue and keeping your lines of communication open."
His comments came after the UAE and other Gulf states criticized U.S. President Donald Trump's recognition this week of Israel's sovereignty over the Golan Heights, a strategic plateau captured from Syria in a 1967 war.
They also followed a visit last month by Trump's senior adviser and son-in-law Jared Kushner to Gulf Arab states to seek support for the economic portion of a long-awaited U.S. proposal for Israeli-Palestinian peace. Gulf Arab states host U.S. troops and are important for Washington's regional defense policy.
Israel has formal diplomatic relations with only two Arab states, neighboring Egypt and Jordan.
But an Israeli cabinet minister visited Abu Dhabi's Grand Mosque last year and fellow Gulf state Oman hosted Prime Minister Benjamin Netanyahu on a surprise trip, the first time an Israeli leader had visited the Sultanate in 22 years.
Israel sees Arab states as its natural allies against regional powerhouse Iran. But many in the Arab world resist following Jordan's and Egypt's lead as long as the Israeli occupation of Palestinian territory continues.
Gargash said he expected increased contact between Arab countries and Israel through small bilateral deals and visits by politicians and athletic delegations. Israeli athletes won gold in an Abu Dhabi judo competition in October, and its national anthem was played.
"The strategic shift needs actually for us to progress on the peace front," Gargash said.
"What we are facing, if we continue on the current trajectory, I think the conversation in 15 years' time will really be about equal rights in one state," he added, alluding to a possible fusion of the Israeli and Palestinian polities in place of the creation of a Palestinian state alongside Israel.
He said this conversation was currently on the margins but this would change.
"A two-state solution will no longer be feasible because a sort of reduced rump (Palestinian) state will no longer be practical," Gargash added.