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Prime Minister Benjamin Netanyahu will announce in his foreign policy speech scheduled for Sunday the adoption of the road map and the "two-state solution" for settling the Palestinian-Israeli conflict, according to sources close to the prime minister. The sources said the speech will "revolve around the road map."

Netanyahu will present a few conditions for the implementation of the road map, above all a Palestinian recognition of Israel as the homeland of the Jewish people. He will also demand that the future Palestinian state be demilitarized.

The prime minister will propose the immediate renewal of negotiations with the Palestinian Authority on the basis of a formula that will allow for self-government as long as the Palestinians do not endanger Israel.

In the speech at Bar-Ilan University, near Tel Aviv, Netanyahu will discuss at length the opportunity that has been created for cooperation between Israel and the Arab states in light of shared concerns about Iran's nuclear program.

Netanyahu will propose a regional process in which Arab states will initiate the normalization of ties with Israel, in parallel to the Israeli-Palestinian negotiations.

The final draft of the speech will only be completed over the weekend.

President Shimon Peres is to meet with Netanyahu today to persuade him to adopt more moderate views regarding the Palestinians. Netanyahu is also to submit a draft of the speech to Defense Minister Ehud Barak tomorrow.

In his speech Sunday, at a bastion of Israel's national-religious movement, Netanyahu will declare that the settlements in the West Bank are not an obstacle to peace.

In recent days Netanyahu has asked his aides to collect data on the settlements. Sources close to the prime minister said Netanyahu will not announce during his speech a freeze on construction in the settlements, as the United States has insisted Israel must do.

Channel 2 news reported Wednesday that Netanyahu has evaluated a number of ways of freezing settlement construction, including issuing a temporary (several months) hold on new construction starts in return for reciprocal measures on the part of the Palestinians and Arab states. Another option is declaring a freeze on construction in Jerusalem, or in the settlement blocs, but these are not expected to be mentioned in the speech.

Sources close to Netanyahu maintain that he will try to reach a tacit understanding with U.S. President Barack Obama on the suspension of construction for a specific period of time.

The differences in the positions of Israel and the U.S. on building in in the settlements narrowed in the wake of talks between U.S. Special Envoy George Mitchell and Netanyahu Tuesday. The prime minister and his aides presented a proposal to break down the issue of natural growth in the settlements according to various types of construction, such as new building, the expansion of existing structures and the construction of public housing.

A Jerusalem source said the talks, which lasted about four hours, "resulted in a great deal of progress," as a result of the more flexible proposals put forth by Netanyahu on the settlements.

A senior Washington source confirmed that progress had been achieved, but stressed that "our position on the need to cease settlement construction has not been altered at all. The talks were good and we will continue in a few days."

The Prime Minister's Bureau refused to comment.