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Israel is expecting the Arab League to adopt an improved version of the Saudi peace plan at a summit meeting called for the end of this month in Riyadh, senior government sources told Haaretz yesterday.

"We understand that the intention is to improve the initiative and come up with a better offer," said one.

Foreign Minister Tzipi Livni presented Israel's demands yesterday. First and foremost, she said, Israel objects to the document's section on the Palestinian refugees, which was not part of the initial Saudi draft, but was added at the 2002 Arab League summit in Beirut.

"A new summit is in the offing, and they ought to know which parts [of the plan] are acceptable to Israel and what seems to us like an absolute red line," she explained in an interview with Channel 10 television.

Livni said that the original draft presented by King Abdullah of Saudi Arabia "was, in my view, positive." That draft called for a full Israeli withdrawal to the pre-1967 borders in exchange for peace and normalization with the entire Arab world.

"Admittedly, the initiative spoke of the 1967 lines, but I only wish we were in a situation in which the conflict was just a border dispute," she added.

The new article inserted at the 2002 Beirut summit, however, demanded a "just solution to the Palestinian refugee problem, to be agreed upon in accordance with UN General Assembly Resolution 194," and that resolution calls for allowing the refugees to return to Israel. It therefore contradicts Israel's vision of a two-state solution, which, explained Livni, calls for a Jewish national homeland alongside a Palestinian national homeland, with the latter serving as the solution for the Palestinian refugees.

Livni said that she has presented this stance in conversations with Palestinian representatives with whom she met over the last month. She reiterated it in an interview that was published in the Palestinian daily Al-Ayyam yesterday, in which she said bluntly, "It is impossible for Israel to accept the Arab peace initiative in its current formulation."

Prime Minister Ehud Olmert has said a few times over the last few months that the Saudi initiative contains "positive elements."

The Riyadh summit, which was called by King Abdullah, is slated to take place on March 28 and 29. The agenda includes the Arab peace initiative, the Iranian threat and the communal tensions in Lebanon. Over the last few weeks, Abdullah has tried to mediate on all of these issues, with the goal of promoting regional stability.

Olmert, meanwhile, will hold another meeting with Palestinian Authority Chairman Mahmoud Abbas in two weeks, while Livni will travel to Europe next week to meet with European foreign ministers in the framework of Israel's Association Agreement with the European Union. During these meetings, she will urge her European counterparts not to deviate from the Quartet's demand that any Palestinian government recognize Israel, renounce terror and honor previous Israeli-Palestinian agreements. She will also present what she called "the Israeli peace initiative" for a two-state solution.