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The U.S. administration is holding separate talks with Israel and Saudi Arabia before the Arab League summit in Riyadh late this month that will deliberate renewed approval of the overall Arab peace plan known as the Saudi initiative.

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.

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.

Prime Minister Ehud Olmert said yesterday 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 yesterday 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

Secretary of State Condoleezza 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.

Six months ago Bandar met with Olmert in Jordan and their meeting sparked the process for the adoption of the Saudi initiative as the basis for a diplomatic process.

The main amendment to the Saudi initiative required by Israel deals with the refugees. The plan's current version refers to United Nations General Assembly Resolution 194, and the Palestinians interpret this non-binding resolution as calling for the resettlement of refugees inside Israeli territory.

In a meeting held two weeks ago with a senior European diplomat, Olmert said 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."

This view was echoed by Foreign Minister Livni two weeks ago.

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.