Israel firm on refugees after Bush dismays Arabs

JERUSALEM (Reuters) - Israel ruled out all debate on letting Palestinian refugees return in any peace deal, as U.S. President George W. Bush ended a visit on Friday that left Arabs dismayed by his outspoken support for Israel's "chosen people".

As Bush flew out after three days of celebrations of Israel's 60th anniversary, an Israeli government spokesman said Palestinian insistence on the right of return for 4.5 million refugees and their descendants was "the ultimate deal breaker".

Six months into negotiations sponsored by Bush in the hope of a deal before he leaves the White House, Prime Minister Ehud Olmert's spokesman used some of the toughest Israeli language yet to insist that President Mahmoud Abbas abandon 60-year-old refugee claims if he wants to establish a Palestinian state.

"This demand, which does not exist under international law, for right of return, is the ultimate deal breaker. You cannot have peace and this demand at the same time," Mark Regev said.

Some 700,000 people, half the Arab population of Palestine in May 1948, fled or were driven from their homes when Israel was created. Letting them and their families live in Israel now would undermine its nature as a Jewish state, Israel argues.

It also disputes the legal basis of the right of the return first set out in a United Nations resolution of December 1948.

PALESTINIAN DISMAY

Bush, who steps down in January, made little reference to the peace negotiations or to the Palestinians at all while in Israel. Many Palestinians were dismayed by a speech to Israel's parliament in which he spoke of a shared divine providence uniting American Christians like himself with Israel's Jews.

Palestinian negotiator Saeb Erekat told Reuters: "He should have told the Israelis that, 1 mile from where he was speaking, there is a nation that has lived in disaster for 60 years. He should have told the Israelis no one can be free at the expense of others. He missed this opportunity and we are disappointed."

Bush called Israel a homeland for God's "chosen people" and pledged Washington would remain its "best friend in the world".

As Palestinians in the occupied West Bank and Gaza Strip and in camps abroad held protests on the 60th anniversary of their exile from cities and farmlands that are now in Israel, Bush spoke of European Jews in 1948 "arriving here in the desert".

In the Palestinian newspaper al-Ayyam, columnist Samih Shabib wrote: "Bush is blind to the right of return.

"The U.S. administration's attitude towards Israel inherently promotes hostility and deepens hatred towards the United States and its policy. Is this hostility, and its consequences, in America's interest? I don't think so."

Olmert's spokesman Regev acknowledged the suffering of Palestinian refugees but insisted Abbas must abandon their claims if he wanted a Palestinian state, 60 years after Arabs rejected a U.N. plan to partition Palestine into two states.

"We are not insensitive to suffering that the Palestinians or the Arabs have gone through," he told reporters.

But he added: "The so-called right of return is antithetical to a two-state solution ... I would question someone's commitment to peace and reconciliation if they believe that the so-called right of return must be implemented."

LITTLE PROGRESS

There was no immediate reaction from Palestinian officials.

Though there have been few obvious signs of progress toward a peace deal, both Olmert and Abbas have pressing domestic reasons for presenting some sort of accord, even if many analysts believe both are too weak at home to implement it.

Some see Abbas's reference to proposals for an "agreed and just" settlement of the refugee issue as a sign he might accept, despite strong resistance among his people, a deal that gives a few people a chance to recover homes and compensates the others.

In return, though again in the face of solid domestic opposition, Olmert may be ready to let the Palestinians have part of Jerusalem for a capital and give up other occupied land.

On Thursday, Bush and his wife Laura visited a Jerusalem museum, where they viewed artefacts from the time of biblical writings and met a group of young Israelis.

"What's on my mind is peace," Bush told them, adding he hoped people could live in harmony. "I believe it's possible."