Foreign Minister Tzipi Livni and her American counterpart Condoleeza Rice will discuss the 2002 Saudi initiative for Mideast peace during their meeting in Washington this week, an aide to Livni said Monday.

"She [Livni] certainly sees positive elements in the Saudi initiative that could serve as the basis for further progress," Ido Aharoni said.

Haaretz reported earlier Monday that the U.S. administration is holding separate talks with Israel and Saudi Arabia ahead of the Arab League summit in Riyadh late this month, in which Saudi plan is likely to be the focus.

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Livni herself said Monday that the issue of the Palestinian demand for a right of return of Palestinian refugees was Israel's main point of contention with the initiative.

"The Saudi initiative is based on a very positive idea," the foreign minister told Israel Radio, "unfortunately other sections were added to this initiative" that place unrealistic demands on Israel.

The initiative won the support of the Arab League during a summit in Beirut five years ago, calling for an Israeli withdrawal to 1967 lines, the establishment of a Palestinian state with East Jerusalem as its capital, and a "just and negotiated" agreement to the problem of the refugees.

In return, the members of the Arab League offer Israel full normalization of relations and an end to the Arab-Israeli conflict.

Livni said that the most problematic addition from Israel's viewpoint is the demand to allow Palestinian refugees to exercise their right of return - the unconditional migration of displaced Palestinians to all areas occupied by Arabs in pre-statehood Palestine - including places that today are part of Israel proper.

In its current form, the Saudi plan bases its demand for exercising the Right of Return on United Nations General Assembly Resolution 194; the Palestinians interpret this non-binding resolution as calling for the resettlement of refugees inside Israeli territory.

According to Livni, the right of return goes against the concept of the establishment of two coexisting national states - one Jewish and one Palestinian. "The Palestinian state should also constitute the solution to the problem of Palestinian refugees," she said.

"Therefore Israel is saying today that the Saudi initiative has positive elements, but it also has sections that are problematic," Livni concluded.

In a meeting held two weeks ago with a senior European diplomat, Prime Minister Olmert said also that "Israel will never accept Resolution 194, and this constitutes a red line for us. But anything over this red line, including creative solutions to the refugees [problem], which does not include their settlement in Israel, is open for discussion."

Saeb Erekat, a top aide to Palestinian Authority Chairman Mahmoud Abbas, said that the Saudi plan was thoroughly discussed during Sunday's summit between Abbas and Olmert.

Erekat said Abbas encouraged the Israelis to consider the plan, despite their misgivings. The PA chairman explained
that it is the most strategic thing that has happened, Erekat said.

Israel wants to see changes
As reported in Haaretz 10 days ago, Israel wants to see some changes to the Saudi initiative so that it can serve as an agreed basis for the renewal of the diplomatic process.

Olmert said Sunday at a cabinet meeting that the initiative should be taken very seriously.

"We hope very much that during the meeting of the heads of Arab states that will be held in Riyadh, the positive elements expressed in the Saudi initiative will be validated and perhaps will enable the strengthening of the chances for negotiations between us and the Palestinians," Olmert added.

Olmert made the statement at the start of the cabinet meeting, in front of television cameras. It was both more positive and detailed than his previous comments on this issue. Previously he only referred to the "positive elements" in the Saudi initiative.

Political sources in Jerusalem confirmed Sunday that diplomatic talks are being held concerning the Saudi initiative, but refused to give details.

Palestinian Authority Chairman Mahmoud Abbas raised the issue during talks with Olmert in Jerusalem, the sources said.

Saudi National Security Adviser Prince Bandar bin Sultan, the main interlocutor of the kingdom with Israel, is visiting Washington. At the same time, Foreign Minister Tzipi Livni is visiting the U.S. capital.

Aides to Olmert, visiting Washington last week, apparently held talks with their American counterparts on the Saudi initiative.

Rice to return
Rice is expected to visit the region late next week for a series of meetings ahead of the Arab League summit in Riyadh.

It is believed that Prince Bandar has been in contact with his Israeli interlocutors, although there has been no confirmation of this.

A meeting between Bandar and Olmert in Jordan six months sparked the process for the adoption of the Saudi initiative as the basis for a diplomatic process.

Vice Premier Shimon Peres has responded positively to the growing Saudi Arabian involvement in the diplomatic process.

Peres discussed this development with Olmert in recent days following consultation with experts, and noted the positive results that a Saudi-Israeli rapprochement will have.

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