Israel rejects permanent settlement proposal by US

JERUSALEM: Israel has rejected a US proposal to negotiate a permanent settlement plan with Palestinian Authority Chairman Mahmoud Abbas, a media report here said.

Prime Minister Ehud Olmert turned down the proposal put up by US Secretary of State Condoleezza Rice during his recent visit to Washington, fearing that failure on the part of Abbas to sell the agreement would lead to demands of more concessions from Israel, daily Ha'artz reported.

Olmert believes that Israel might then be pressured to make the Palestinian leaders' task easier, it said.

Rice supports talks on a "shelf agreement" that would outline the permanent settlement, but not be implemented immediately because of Abbas' weak standing.

The US Secretary of State views that merely reaching such an agreement in principle would provide the Palestinians with a "political horizon" and hope, thereby encouraging them to fight terror and to establish governing institutions in preparation for an independent state, the report said.

Foreign Minister Tsipi Livni is said to share Rice's approach. Olmert agreed several months ago to launch talks with Abbas over "a political horizon," on conditions that it would not deal with the three thorny issues - Jerusalem, permanent borders and the refugees.

He wanted it to be limited to the nature of the future Palestinian state, its systems of government and law and security arrangements for the territories.

Political sources in Jerusalem told the daily that as Abbas becomes stronger and more able to sell the agreement to his people, Israel will agree to expand the discussion's agenda to include the core issues.

Meanwhile, Olmert is to seek cabinet approval today on a proposal to restore normal relations with the Palestinian emergency government headed by economist Salam Fayad.

The proposal, which is likely to be approved, will lead to resumption of the transfer of customs fees and VAT taxes collected by Israel on behalf of the Palestinian Authority, but frozen due to the failure of the Hamas-led Palestinian government to accept the international Quartet's criteria.

"In view of the situation in the Palestinian Authority, it is necessary to implement the appropriate policies vis-a-vis the emergency government and adjust earlier decisions made by the Israeli government," the proposal reads.

The proposal also notes that Israel will continue its policy of refraining from any contacts with Hamas.