RAMALLAH, West Bank ? At Yasser Arafat’s compound, under Israeli siege for the 10th day, the two sides are bickering about cigarette rations and garbage removal but they aren’t talking to each other about ending the standoff.

The petty arguments and Arafat’s confinement to a few rooms left standing in a pile of debris are emblematic of what has happened to hopes for peace after two years of fighting.

On Saturday, the second anniversary of the Palestinian uprising against Israeli occupation, Arafat addressed a crowd of tens of thousands in Gaza City by telephone hookup during which he shrugged off the siege and promised that “noble Jerusalem will remain the capital of the Palestinian state whether anybody wants it or not.”

“We are not only defending our holy places, Christian and Islamic, but every inch of our holy land,” he said.

The contrast between promise and reality couldn’t be sharper.

Arafat, once a world traveler who stayed at the best hotels, now sleeps on the floor of his office, and the about 200 people confined with him bunk in hallways.

Everyone sips frugally from water bottles. Palestinians complain that Israelis have restricted the entry of coffee and cigarettes to a group accustomed to using both in abundance. It appears to be a tactic to make those inside jumpy.

Water has been cut off intermittently and those inside are trying to use toilets as little as possible, because of the overpowering stench, said Ahmed Tibi, an Arab member of Israel’s parliament who says he speaks with Arafat daily. Garbage is piling up.

The Israeli military spokesman’s office refused to comment on the issue.

It’s Arafat’s third stretch under Israeli siege this year. The latest blockade began after a Sept. 19 suicide bombing in Tel Aviv that killed six.