Israel wants to deal with refugee issue up-front

JERUSALEM (Reuters) - Israel wants the divisive question of Palestinian refugees addressed early in talks with President Mahmoud Abbas and suggested movement on the issue could lead to a pledge to hand over more Israeli-held land.

In meetings over the last week with visiting U.S. and European officials, Foreign Minister Tzipi Livni and other Israeli leaders stressed the importance of addressing the refugee issue up-front, participants said on Thursday.

No issue, with the possible exception of Jerusalem, is as emotional and troubling for Palestinians and Israelis as the fate of Palestinian refugees at the core of the conflict.

"This is a killer for Abbas," one diplomat said of the refugee issue, adding that addressing it first could jeopardize talks over a U.S.-sponsored conference expected in November.

Israel wants any agreement of principles to reflect its position, backed by U.S. President George W. Bush, that refugees settle in a future state of Palestine, rather than in Israel.

Many Israelis fear that any mass return would threaten the Jewish character of the state carved out in 1948.

Without an early agreement in principle on refugees, Foreign Ministry spokesman Mark Regev said, "it will always remain a concern that the establishment of a Palestinian state has not ended the conflict and that there are more demands on Israel".

Diplomats said Israel wants talks on refugees to precede the other final status issues of borders and Jerusalem.

Abbas aide Saeb Erekat said it was premature to discuss such matters. "It's up to the leaders to decide," he said.

In return for movement on refugees, Western diplomats said Israel was likely to agree to principles that include a call for a Palestinian state in nearly all of the West Bank and Gaza Strip. Israel would seek to hold onto some of the largest Jewish settlement blocs through land swaps.

IMPETUS

Regev declined to comment specifically on what the Palestinians could receive in return for movement on refugees. But he said: "Movement on this issue would give great impetus to dealing with other issues."

Western officials and analysts said any movement by Abbas away from the "right of return" would have to be subtle and gradual to avoid a fierce backlash, particularly from Hamas Islamists who seized the Gaza Strip in June.

Palestinians have long demanded that refugees and their descendants have the right to return.

A U.N. agency said the number of registered Palestinian refugees totaled around 4.4 million, a figure disputed by some. One third of those registered, about 1.3 million, live in 58 recognized refugee camps, the agency added.

Regev said: "Creation of two homelands means just as Israel solved the Jewish refugee issue, the creation of Palestine will solve the Palestinian refugee issue."

As a starting point on refugees for Olmert and Abbas, Western officials pointed to proposals by U.S. President Bill Clinton before he left office in January 2001.

Clinton said the new state of Palestine should be the homeland for refugees, without ruling out the possibility Israel might accept some of them.

One Western official said Washington wanted Olmert and Abbas to at least develop a "concept" for how they would settle the refugee question and other "fundamental issues" before the conference so that participants can offer support.

"In order to implement anything that they agree on, it's going to require the support of the international community with financial resources, maybe with other things, including admitting refugees," the official said.