Bethlehem, a place of Christian pilgrimage for centuries, will soon be encircled by Israel's security barrier. Is the town to become no more than a museum among ancient shrines? John Harris meets the people campaigning to keep it alive

Guardian

Bethlehem's Church of the Nativity seems bizarrely quiet, given that it's Sunday morning. A young man dressed in a Harley Davidson T-shirt distractedly sweeps the floor in front of its main altar, the odd group of tourists is escorted through the chapels and cloisters, and in a underground chamber, a small Armenian Orthodox service - a ceremony-cum-mystic-rite involving unbearably sweet clouds of incense and the booming incantations of a priest dressed in a pointed black hood - nears its conclusion. Every few minutes, the thought once again hits home: how strange that while people flock to churches in Tennessee, Lagos and London, the supposed birthplace of Jesus Christ is almost empty.

"For me, things are actually starting to improve," says Adel, one of the handful of tour guides who still make their living here. This is a regular refrain - that since the death of Yasser Arafat and the tentative revival of the peace process, visitors are starting to trickle back. "But it's still quiet," he continues. "People are scared to come to Bethlehem because of the checkpoints and so on. And we need them to stay here. Most of them have lunch in Bethlehem and then go back to Israel." This morning, he's seeing to the needs of a party of Indonesian Christians, who tumble into the so-called Grotto of the Nativity in a small riot of awe-struck gasps and popping flashbulbs, excitedly crowding around a 14-pointed metallic star said to mark the spot on which Christ took his first earthly breaths. "We were a little scared to come here," one of them tells me. "The Israeli soldiers came on the bus and checked all our bags. But it's OK now. We feel safe."

This is the message that Bethlehem is desperate to send to the world. This month sees the launch of an initiative - Open Bethlehem - intended to help rescue this town, at least, among all the towns on the West Bank facing isolation and collapse. By spreading word of Bethlehem's surprising calm and the endlessly hospitable spirit that has made pilgrims welcome for centuries, the campaigners hope to encourage visitors to return. There is a particular urgency because Israel's infamous security barrier is near completion, while a ring of expanding Jewish settlements eats into Palestinian territory. According to Open Bethlehem's first briefing paper, "The cradle of biblical history is in peril. Today, it resembles a bleak prison town surrounded by a concrete wall." The unspoken question is this: why, given the place of Bethlehem in the Christian imagination, does the outside world seem so unconcerned?

The predicament becomes instantly clear when you enter Bethlehem, passing from the outer reaches of Israeli-controlled Jerusalem into territory administered by the Palestinian authority. First, you see the barrier, grimly snaking from east to west. Then there is the inevitable checkpoint: 50 or so yards of sandbags, prefabs and breeze blocks, where soldiers warily check the documents of foreign visitors and those fortunate Palestinians whose IDs allow them to travel north. Here, the incense-laden piety of the Church of the Nativity is replaced by a cold tension - though its nervy ambience is as nothing compared with a similar installation that lies another half mile inside Bethlehem's limits.

Rachel's Tomb is the burial place of the wife of Jacob, described in the book of Genesis. It's a Jewish holy site, where women come to pray for their children - though, in one of those unfortunate coincidences that so unsettle Middle Eastern politics, it adjoins a Muslim cemetery. Though well within the Palestinian territory enshrined in the 1993 Oslo accords, its sanctity ensured that it would form an enclave "under the security responsibility of Israel", with the proviso that the "free movement of Palestinians" on the main road that links Jerusalem, Bethlehem and Hebron would be guaranteed. Now all that is a memory: an austere concrete roadblock, draped with the Israeli flag, scythes the road in two. Meanwhile, work is proceeding on a fortified corridor that will ferry Israeli traffic to and from the tomb, and take its place in the 500-mile length of concrete, tarmac and wire that forms the barrier, built - according to Ariel Sharon - "in order to defend our citizens against terror activities".

What this means for the local residents is simple enough. Where once there was a teeming neighbourhood, festooned with cafes and souvenir shops, there is now an arid no man's land where Israeli soldiers pace along the deserted store fronts; the few businesses that are left face imminent extinction. The grandly named Bethlehem Souvenir Centre, where displays of religious knick-knacks - vast wooden crucifixes, framed crowns of thorns, small phials of water allegedly from the River Jordan - stretch into the distance, was once busy and prosperous. Now it seems destined to fall into dereliction.

"Before, you could not cross the road here, there was so much traffic," says Khalil Jousef, a 41-year-old who has worked here for 12 years. He speaks in staccato sentences, brimming with an indignant refusal to accept what is happening just outside. "We used to have 32 workers here. Now, we have fewer than 12. But we want to survive. We want to stay. We want to live. Each one of us has three, or five, or maybe more kids. And where can we move? Tell me where?

"We are living in a prison," he says. "If you are surrounded by a wall, who will come to you? And where can we go? I have five children, and none of them have seen Jerusalem. I have tried to go: I told the soldiers, 'I want to take my children to see the Old City.' But I am not allowed."

Such is the tenor of just about every conversation I have here: rather than the stone-throwing, chaotic, nothing-left-to-lose cliché of Palestinian life, there's a recurrent sense of ordered, everyday lives rendered almost surreally impossible. Down the street from the souvenir shop, for example, are the offices and one-time family home of Bassem Khoury, an urbane 57-year-old architect, soon to be walled in by the road to the tomb. The lounge, whose bookshelves creak under the weight of Hemingway, DH Lawrence and George Bernard Shaw, suggests a life lived in elegant comfort; yet in the master bedroom, the walls are scarred with bullet holes. The lush garden is no longer in use because of the proximity of a commandeered tower block, from which Israeli soldiers yell abuse. Pointing out one particular feature, Khoury is moved to tears: a tree, within sight of a back window, from which he used to hang Christmas decorations each year, hacked down to an ugly stump by the military, lest anyone should climb it.

A few doors down is a large apartment building, home to three Palestinian families, in the midst of what now amounts to a construction site. We've been brought here by Leila Sansour, Open Bethlehem's chief executive (and director of the 2003 documentary Jeremy Hardy Vs The Israeli Army). For her, the scene in front of us is all too familiar: a Caterpillar digger scoops chunks out of the road, in preparation for the barrier's foundations, while three soldiers keep watch, and a red and black pick-up truck speeds up and down the street, slowing to a crawl whenever it passes anyone deemed worthy of attention.

The two men inside, dressed in baseball caps and sunglasses, seem to be neither policemen nor soldiers, though both are armed. They draw level with us, and begin asking a flurry of anxious questions: "Who are you? What are you doing here? Where are you from? Do you have papers? What are you taking pictures of?" When asked who they are, the man in the passenger seat can offer only that the two of them are "in charge". What of? "Well, we are in charge here."

Once he's seen our passports, they rumble on down the street, though it soon becomes obvious that suspicions have been aroused. Our plan was to visit one of the families, but each step in the direction of the entrance finds the men taking two towards us, stagily toying with their guns. We give up, and spend an hour sitting outside the deserted Christmas Tree cafe, watching the digger roar on, while the two men take their places outside a boarded-up jewellery shop.

Ariel Sharon, it should be noted, has claimed that the barrier has been built "with every effort to minimise the infringement on the daily life of the Palestinian population".

In the mid-1990s, during the interlude of optimism that followed the Israeli army's withdrawal after 18 years of occupation, Bethlehem flourished. The 1998 edition of the Rough Guide To Israel And The Palestinian Territories talked of a town "struggling to cope with all the cars, taxis and tour buses". Hotels and shops sprang up: the town's religious associations would help provide a Palestinian state with a sorely needed source of hard currency. But the second intifada of September 2000 and the subsequent Israeli reoccupation turned such hopes to dust. Worse was to come: the five-week siege at the Church of the Nativity in the spring of 2002 - when civilians and Palestinian gunmen took refuge from invading Israeli forces - reminded the rest of the world that this was a war zone.

The statistics tell the story of Bethlehem's downfall. In 2000, the average number of tourists visiting the town each month was 91,276. Last year, the figure was 7,249. In the same period, the number of people employed in the local hotel trade fell by 75%. At the Jacir Palace, a branch of the InterContinental chain that charges a mere $80 a night for its four-star luxury, we arrive to find that we're the only guests. The oddness of the experience is compounded by the background music: the theme from Zeffirelli's version of Romeo And Juliet - otherwise known as the signature tune for Simon Bates's Our Tune - on an endless loop, drifting around the deserted courtyards and occasionally mixing with calls to prayer from the local mosques.

As Bethlehem's economic prospects have crashed, so its population has altered, threatening the religious mix that has long formed a particularly fascinating aspect of the town's character. Since 2000, 10% of its Christians have emigrated; as one report by the International Centre of Bethlehem puts it, should the trend continue, "Bethlehem might very soon be little more than a Christian museum with many ancient shrines, but no living, witnessing community."

And then there is the security barrier. Just as that other wall once sat in the middle-distance of any exchange with a Berliner, so its oppressive contours inform pretty much every conversation I have in Bethlehem. One need only journey 10 minutes from the town centre to experience its cruellest effects - houses are prised away from neighbouring villages, farmland will soon be covered in asphalt, the people are snarled up in a Kafkaesque maze. Confiscation notices left on their property, based on a 50-year-old law regarding land deemed to belong to "absentees", give them 40 days to appeal, but they can only do so through courts in Israel - to which most of them are barred from travelling.

Some, though residing safely within Palestinian territory, have fallen victim to orders prohibiting anyone living within 70 metres of the barrier. In and around Bethlehem, close to 900 acres of land have already been grabbed; to make matters worse, the wall's labyrinthine route will turn some Palestinian territory into a series of strangulated territorial islands.

On our first morning in Bethlehem, we spend an hour in the hamlet of Al Khas, a clutch of houses across a narrow valley from the nearby village of Al Nouman. The two places share a hospital and school, and many of their residents come from the same extended families. Their fate, unfortunately, revolves around an Israeli-built road and fence that slices the valley in half, leaving Al Khas in the hands of the Palestinians and Al Nouman under occupation; already, the farmhouses and greenhouses on the wrong side of the divide are threatened with demolition. What will happen to the land is perhaps demonstrated by the olive groves and fruit orchards that the Israelis have already streaked with tarmac - and, just to the right, the rapidly expanding Jewish settlement of Har Homa, whose skyline is peppered with cranes.

When we arrive, we are met by Nidal Huzaibi, a 36-year-old fruit and vegetable farmer. He explains his situation against the distant hum of an Israeli army Land Rover, slowly trailing a handful of elderly Palestinians at the foot of the valley, as they attempt to make the crossing from one side to another. "These two villages are twin villages," he says. "Their lives are completely intertwined. But the argument the Israelis use is that Al Nouman is part of the suburbs of Jerusalem. They say the people who live there have no right to live there, and they have to move."

"First, they threw papers on the land," he says. "They put stones on top of them. And I found the one that applied to my farmland after the time for appeal had gone. It said, 'Under military orders, this piece of land has been confiscated.' " By his side is his 10-year-old daughter Ashjan. "Her grandparents on her mother's side live over there," he says, pointing across the valley. "And every time we have tried to visit we have been stopped. Now, we're pretty much prohibited. She last saw her grandmother three months ago."

The rest of the morning is spent driving around Bethlehem's rural fringes, worth doing not only to understand the impact of the security barrier, but also to marvel at the landscape: craggy ravines in which houses seem to cling on to the rock, and bare hillsides that slope into chocolate-brown fields full of crops, evoking an inevitably biblical romance. Wherever we go, people amble up to our taxi and explain their predicament. "I used to have a good life," says Jadoun, a shepherd who is now routinely chased from his old grazing-grounds by Israeli soldiers, despite living and working on the Palestinian side of the wall. "I felt free. But now, I feel ... caged. And it makes no sense. I am outside their wall. Even so, I am too close. Why?"

At the summit of one hill, there is a huge house, all courtyards, arches and electronic gates, that somehow manages to combine Middle Eastern architecture with the showy grandeur of opulent European holiday homes. It was once the home of a Palestinian man who worked at the Italian consulate and commuted each day to Jerusalem. Israeli restrictions eventually forced him to relocate, and now the house lies empty and padlocked, its high-ceilinged rooms full of twittering birds.

Like all the buildings that surround it, it's apparently under threat of Israeli confiscation. And I ask our guides: when it is eventually wrenched from one territory to another, what will happen to it? "Lalhadem," one of them spits. It means "For demolition".

Beyond the Israeli checkpoints, in the Jewish settlements that ring Bethlehem's northern frontier, you encounter a completely different reality. Har Homa (Hebrew for "mountain of the wall", though not that wall) is five minutes away, sitting in territory seized by Israel after the six-day war of 1967; here, there are well-stocked supermarkets, pristine children's play areas, and the constant background noise of construction crews. It's home to people priced out of Jerusalem's property market: in the main, young families attracted by three-bedroom apartments that sell for around £100,000, and government programmes offering financial assistance. Watching young mothers push their prams up its steep streets, it's easy to forget that in March 1997, the initial plans for Har Homa were condemned by a UN resolution. It didn't count for much: five days later bulldozers began clearing the place the Palestinians called "green mountain", and in 2004, the settlers' future was underwritten by George Bush's support for Israel's claim to the land, on account of "changed realities on the ground".

Facing towards Bethlehem, over the road from a clutch of cranes, is the workplace of 45-year-old Moshav Orot, an estate agent who handles the sale of Har Homa's newest apartments, part of a building drive that will see its population double. "This is part of Jerusalem," he tells me. "It's not an occupation place. It's in Israel." One word, which I unthinkingly use at the outset of our conversation, causes him particular irritation. "We are near Bethlehem, yes," he says, "but this is not a settlement.

"We want to live securely, like you do in England," he says. "We want peace. And you have to understand that the barrier is there for safety. The whole world is making a lot of noise about it. But since it was built, things are more quiet." I wonder how he feels about the Palestinian land that the building of the wall - and, indeed, the expanding settlements - has so imperilled. "I can't answer this question," he says, "because I don't know what has happened to buildings on that kind of land, if they were on that land at all."

Underlying just about everything he says - not least, his contention that even if the pre-1967 borders were restored, the Palestinians would still be set on "throwing Israel into the sea" - is the belief that on the other side of the barrier lurks unimaginable trouble. Yet Bethlehem, even as the diggers churn up the streets and the wall casts its long shadow, remains surprisingly tranquil. Within its cafes, markets and squares, it remains, in the words of an Open Bethlehem document, "a bastion of an open, diverse Middle East... placed at the point where East and West, Christianity and Islam, co-exist in harmony."

The night we leave, however, there comes an incident that fractures the atmosphere. As we discover while queuing at a checkpoint, Palestinian gunmen have carried out two drive-by shootings - one in Eli, a Jewish settlement north of Jerusalem, the other at Gush Etzion, eight miles from Bethlehem - leaving three Israelis dead. By way of retaliation, settlers are reportedly pulling Palestinians from their cars and beating them up.

Not for the first time, another of Ariel Sharon's pronouncements takes on a bitter irony. In 2003, echoing the American poet Robert Frost, he claimed that "good fences make good neighbours". Tonight, I'm not sure even the soldiers would agree.