Arab League council considers peace process developments, direct Palestinian-Israeli negotiations

Council asserts just, overall peace is Arabs’ strategic option, says peace process is indivisibly comprehensive

Meeting underlines principles mentioned in Arab peace initiative

Council refuses recognition of Israel as Jewish state, rejects judaization of Jerusalem

Arab ministers said on Thursday they continued to extend an offer of peace to Israel, and called on the Palestinians to resolve their divisions to strengthen their hand in the talks.

"The Arab initiative is still being offered and it represents a chance for peace," Iraqi Foreign Minister Hoshyar Zebari said at the start of an Arab League meeting in Cairo.

"This peace cannot be possible without the full Israeli withdrawal to 1967 borders including a withdrawal from the Golan Heights and south Lebanon and establishing an independent Palestinian state with East Jerusalem as its capital," he said.

Palestinian negotiators are threatening to leave the first direct peace talks of Israel's Prime Minister Benjamin Netanyahu's tenure if Israeli settlement building resumes in the occupied West Bank after a moratorium expires on September 30.

The settlements are on territory captured by Israeli forces in the 1967 Middle East war and are deemed by the World Court to be illegal under international law, a finding disputed by Israel.

Netanyahu, whose coalition government is dominated by pro-settler parties, said on Sunday he would not extend the construction moratorium but could limit the scope of further building in some settlements.

The Hamas government in Gaza opposed Palestinian President Mahmoud Abbas's decision to enter the U.S.-brokered talks attended by U.S. Secretary of State Hillary Clinton.

"... we call on our Palestinian brethren to resolve differences between them and follow through with national reconciliation as fast as possible," Zebari said.

Arab League Secretary-General Amr Moussa said the peace talks were taking place in a "suspicious and worrying" environment and the League was watching the situation in the Palestinian territories as the moratorium nears its ends.

Arab League ministers are expected to draw up a resolution outlining a common position on the talks.

Arab League Secretary General Amr Moussa said late Thursday that an extension of Israel's moratorium on settlement construction is a key, dynamic issue for the direct peace talks.

"Settlements freeze is dynamic because it changes the reality on the ground," Moussa told a press conference after an Arab League's ministers council held in Cairo to discuss the Middle East peace talks, as well as regional developments.

"It is a key issue to show how serious Israel is, in order to be able to negotiate other issues like borders and refugees. It is an essential condition for the success of the talks."

In their closing statement, the foreign ministers called on US President Barack Obama to adhere to his call for Israel to extend its moratorium, which is due to expire on September 26.

They described the settlements as a "grave impediment to fair and comprehensive peace."

The session comes two days after Palestinian President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu held their second round of direct talks in the Egyptian Red Sea resort of Sharm el- Sheikh.

The face-to-face meetings on Tuesday in Egypt and Wednesday in Jerusalem failed to dispel fears that the talks could be derailed by the row over the freeze of settlement construction.

Israeli officials have indicated the moratorium would not be extended after the deadline, while Palestinians have said it is a crucial issue that could lead to a breakdown of the talks.

More than 2,000 housing units are ready for construction in Israeli settlements on the occupied West Bank as soon as the 10-month partial building freeze ordered by Netanyahu expires, the Israeli activist group Peace Now said this week.

Moussa said that Arab states will give the direct talks a chance, despite doubts and fears over the Israeli position, warning that developments in the coming few weeks would be crucial.

The direct Israeli-Palestinian negotiations kicked off at the beginning of the month, after a hiatus of nearly two years, following several months of indirect talks.

The statement called on the Arab countries to increase their financial support for the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA).

In the opening session, UNRWA Commissioner General Filippo Grandi had called on Arab states to bolster their support for the refugees, noting that the agency continues to face an 80-million-dollar shortfall and is expecting another deficit in 2011.

"While we are genuinely grateful for your consistent assistance over the decades, we cannot - and must not - avoid the reality of how much more needs to be done to address the challenges faced by UNRWA and Palestine refugees," he said.

Grandi said that "successful peace talks will have to press the refugees' question," and called on parties to take it into account.

Iraqi Foreign Minister Hoshyar Zebari, whose country took over the rotating presidency of the council on Thursday, urged Palestinian factions to reach national reconciliation as the direct talks were being held.

The council also discussed political and security developments in Iraq, after the US reduced its troop presence in Iraq to just under 50,000, as well as Lebanon, Sudan, Iran, Arab-African relations and Israel's nuclear arms.

Earlier, Netanyahu had on Sunday urged the Palestinians to recognize Israel as "Jewish people's state" and called for "two states for two peoples " as part of a solution to the Israeli -- Palestinian conflict.

"We say that the solution is two states for two peoples, meaning two national states, a Jewish national state and a Palestinian national state," Netanyahu told ministers at the weekly cabinet session.

"A peace agreement is based, first of all, on the recognition of Israel as the national state of the Jewish People," the premier added.

Netanyahu is scheduled to meet Tuesday with Palestinian National Authority (PNA) President Mahmoud Abbas at the Egyptian Sharm el-Sheikh resort for the fresh round of direct talks after an initial parley in Washington with the United States President Barack Obama two weeks ago.

U.S. Secretary of State Hillary Clinton, U.S. middle east special envoy Senator George Mitchell, Egyptian President Hosni Mubarak and other senior officials are expected at the session at the Red Sea resort, which has been the venue for several such peace parleys over the years.

"I hope that if the Palestinians adopt this basic principle, we will be able to resolve other issues as well, and next year we will be able to wish each other well over the peace that has been achieved," Netanyahu said in a statement sent to Xinhua.

Palestinian interlocutors, however, have said they were not prepared to grant Israel such recognition.

"Israel can call itself whatever it wants. We don't have to recognize those definitions," Abbas told the east Jerusalem Al- Quds newspaper last week.

As well, "The Palestinian National Authority will never recognize that Israel is the national state for Jewish people, as such recognition will directly threaten the Muslim and Christian Palestinians in Israel, and will prevent the Palestinian refugees who left their homes and towns decades ago, from having the right to return," PNA negotiator Nabil Shaath told reporters in Ramallah last week.

But the Israeli side says that such recognition is crucial in building mutual trust.

"Just as we are asked to recognize the Palestinian national state, and I expressed this national agreement during the past year, we also demand and expect the Palestinians to recognize a Jewish state, the State of Israel, as the national state of the Jewish People. This is the true foundation of peace," Netanyahu told the ministers.