Israel wants to ANNEX territory that does not belong to it. Israel can only do that if the Palestinians agree to CEDE that territory to it, precisely because a "unilateral annexation" is illegal. Once you get your head around that concept then what Meridor is saying starts to make sense: if Israel needs the PLO to CEDE the settlement blocks then the PLO will expect a quid pro quo i.e. the PLO will want Israel to CEDE an equal amount of territory toit. Ying and Yang. Cede and Annex.
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from the article: Deputy PM: Israel must cede land to remain Jewish and democratic