Israel has expressed a fresh desire to negotiate a deal with Arab states that could breathe new life into the stalled peace process and end its decades-old conflict with the Palestinians.

In a moment of rare optimism, Ehud Olmert, the Prime Minister, predicted that a Saudi plan endorsed by Arab leaders in Riyadh could usher in an era of peace with its neighbours.

“I am convinced that within five years Israel will be able to reach a comprehensive peace arrangement with its enemies,” Mr Olmert told Yedioth Ahronoth,in one of several interviews published yesterday. The Saudi plan proposes that the Arab world establish diplomatic relations with Israel in return for a Palestinian state within the 1967 boundaries, with its capital in Jerusalem, and with a “just solution” to the Palestinian refugee question.

Mr Olmert’s confidence was met with caution by Palestinian analysts. Many said that he was sending a mixed message in praising the plan for its “revolutionary change in outlook” while refusing to discuss core issues of the Israeli-Palestinian conflict — specifically rejecting the right of Palestinian refugees to return to Israel.

The right of return is “something we certainly can’t agree to and we won’t agree to. I will never accept a solution that is based on their return to Israel, any number,” Mr Olmert told The Jerusalem Post.

He recently rejected a US attempt to broker final-status discussions between his Government and the Palestinian Authority, arguing that such negotiations could not begin while the Hamas-led Palestinian unity Government failed to meet international conditions of renouncing violence, recognising Israel and accepting past Israeli-Palestinian agreements.

However, Mr Olmert also appeared open to the prospect of participating in an international summit of moderate Arab leaders, which could take place during the next meeting of the Quartet of Middle East negotiators to be held in Egypt.

“We are ready to hold discussions and hear from the Saudis about their approach and tell them about ours,” he told Haaretz. “Saudi Arabia is the country that in the end will determine the ability of the Arabs to reach a compromise with Israel.”

Analysts are sceptical that such a summit would produce concrete results, but bringing Arab and Israeli leaders to the same bargaining table would still signify a breakthrough. And while some point out that Mr Olmert’s popularity has plummeted over his handling of last summer’s war with Hezbollah, others speculate that a dramatic breakthrough could restore his reputation.

Past peace deals between the Israelis and Palestinians — such as Camp David and the Oslo Accords — have collapsed because neither side fulfilled its commitments. Under the most recent US-backed “road map” for peace, Palestinian militant groups were to disarm and Israel freeze its expansion of West Bank settlements before the creation of a Palestinian state. But soon after its introduction in 2003 it was essentially abandoned, each side accusing the other of violating parts of the agreement.

“Things are happening that haven’t happened in the past and they are ripening,” Mr Olmert said in one interview. “We have to know how to take advantage of this opportunity.”

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