The Academy of Motion Picture Arts and Sciences’ announcement that “Omar”, one of this year’s candidates for best foreign language film, hailed from “Palestine” has raised eyebrows in these parts, where Israelis and the Palestinians are engaged in peace talks aimed at establishing just such a state.

For starters, much of the drama was shot in the Israeli city of Nazareth, home of director Hany Abu Assad and many of the movie’s actors, rather than in the West Bank, where much of the movie is set. In contrast, Abu Assad’s 2005 film “Paradise Now,” which was also nominated for an Oscar, was billed at the time as coming from the “Palestinian Territories” to avoid the inevitable political saber-rattling over sovereignty.

The United Nations General Assembly’s 2012 recognition of Palestine as a non-member state, over fierce Israeli objections, paved the way for the academy to change its definition this time around. 

Abu Assad also said the film qualified as such because it was the first to be almost completely financed by Palestinians. In any case, he added, the film’s nationality, like his own, was a matter of identity, not geography.

“As long as we are under occupation, it doesn’t matter what it is called,” said Abu Assad, 52, who, like many Arab Israelis, considers himself Palestinian even though he holds Israeli citizenship. 

“That doesn’t make us Israeli. As long as the state is exclusive, you can’t identify with the state as long as it doesn’t recognise you as equal,” he said.

The debate over the film’s land of origin touches on the complex status of Israel’s Arab minority, who make up about a fifth of Israel’s 8 million citizens.

Arab Israelis remained in the country during the war surrounding Israel’s creation in 1948, in contrast to hundreds of thousands of Palestinians who were driven out during the fighting and later came under Israeli occupation when it captured the West Bank and Gaza Strip in the 1967 Middle East war.

Arab Israelis often suffer discrimination and complain of second-class status and frequently identify with their Palestinian brethren. Abu Assad said he considers all of Israel “under occupation” since Arabs do not have full equality with the Jewish majority.

Yousef Abu Wardi, a veteran Israeli film actor, said he could relate to the identity crisis many of his fellow Arabs felt. 

“To be Israeli, does that mean I have to stop being an Arab?” he asked. “Until the final borders are defined here, it is going to be very hard to define who is Israeli and who is Palestinian.”

In “Omar”, a love story set against the backdrop of the Israeli-Palestinian conflict, Abu Assad explores some of these elements by focusing on the plight of Palestinians who collaborate with Israel.

The title character, a Palestinian baker, routinely climbs over Israel’s West Bank separation barrier to visit his beloved Nadia. In one of his escapades he is attacked by an Israeli soldier, after which he and his friends decide to kill another soldier in revenge.

After being arrested he is pressured into becoming an informer, setting off a chain reaction of deceptions and betrayals that will test Omar’s loyalty to Nadia, his friends and his people.

Interestingly enough, Israel’s own 2014 Oscar entry, “Bethlehem”, deals with the same theme of collaboration but focuses more on the intimate relationship between the Palestinian informant and his Israeli handler.

Abu Assad said he made no effort to tell Israel’s side of the story.

“I find any kind of balance between the occupied and the occupier a little false,” he said in a phone call from Los Angeles, where he is awaiting Sunday’s ceremony. “A balance makes it less impressive as a movie. All good movies are told from one point of view.”

Yair Raveh, a film critic from Israel’s leading entertainment magazine Pnai Plus, said both films were equally impressive. While Israel’s “Bethlehem” made an effort to portray both sides and included some national soul-searching, he said the Palestinian “Omar” drew its strength from the rage it projected.

“It’s not an anti-Israeli film per se. It just has a lot of anger and anger is good for cinema,” he said.

“Omar” has mostly played before art house-type theatres in Israel while in the West Bank it has had only limited viewings. That has not stopped passions from rising over the film — and the academy’s stance on its origins.

The Palestinian culture minister, Anwar Abu Aisheh, called the film a “qualitative step” for the Palestinian film industry. “I’m very proud of this movie. It succeeded in introducing the world of our problems under occupation, of our tragedy.”

The movie, which opened in the US on February 21, is the latest in a recent run of Israeli and Palestinian films that have enjoyed success internationally.