Barack Obama is to pursue an ambitious peace plan in the Middle East involving the recognition of Israel by the Arab world in exchange for its withdrawal to pre-1967 borders, according to sources close to America’s president-elect.

Obama intends to throw his support behind a 2002 Saudi peace initiative endorsed by the Arab League and backed by Tzipi Livni, the Israeli foreign minister and leader of the ruling Kadima party.

The proposal gives Israel an effective veto on the return of Arab refugees expelled in 1948 while requiring it to restore the Golan Heights to Syria and allow the Palestinians to establish a state capital in east Jerusalem.

On a visit to the Middle East last July, the president-elect said privately it would be “crazy” for Israel to refuse a deal that could “give them peace with the Muslim world”, according to a senior Obama adviser.

The Arab peace plan received a boost last week when President Shimon Peres, a Nobel peace laureate and leading Israeli dove, commended the initiative at a Saudi-sponsored United Nations conference in New York.

Peres was loudly applauded for telling King Abdullah of Saudi Arabia, who was behind the original initiative: “I wish that your voice will become the prevailing voice of the whole region, of all people.”

A bipartisan group of senior foreign policy advisers urged Obama to give the Arab plan top priority immediately after his election victory. They included Lee Hamilton, the former co-chairman of the Iraq Study Group, and Zbigniew Brzezinski, a Democrat former national security adviser. Brzezinski will give an address tomorrow at Chatham House, the international relations think tank, in London.

Brent Scowcroft, a Republican former national security adviser, joined in the appeal. He said last week that the Middle East was the most troublesome area in the world and that an early start to the Palestinian peace process was “a way to psychologically change the mood of the region”.

Advisers believe the diplomatic climate favours a deal as Arab League countries are under pressure from radical Islamic movements and a potentially nuclear Iran. Polls show that Palestinians and Israelis are in a mood to compromise.

The advisers have told Obama he should lose no time in pursuing the policy in the first six to 12 months in office while he enjoys maximum goodwill.

Obama is also looking to break a diplomatic deadlock over Iran’s pursuit of nuclear weapons technology. A possible way forward, suggested last spring by Dennis Ross, a senior Obama adviser and former Middle East envoy, would be to persuade Russia to join in tough economic sanctions against Iran by offering to modify the US plan for a “missile shield” in eastern Europe.

President Dmitry Medvedev signalled that Russia could cancel a tit-for-tat deployment of missiles close to the Polish border if America gave up its proposed missile defences in Poland and the Czech Republic.

Ross argued in a paper on How to Talk to Iran that “if the Iranian threat goes away, so does the principal need to deploy these [antimissile] forces. [Vladimir] Putin [the Russian prime minister] has made this such a symbolic issue that this trade-off could be portrayed as a great victory for him”.

Ross and Daniel Kurtzer, a former American ambassador to Israel, accompanied Obama on a visit to Israel last July. They also travelled to Ramallah, where Obama questioned Mahmoud Abbas, the Palestinian leader, about the prospects for the Arab plan.

According to a Washington source Obama told Abbas: “The Israelis would be crazy not to accept this initiative. It would give them peace with the Muslim world from Indonesia to Morocco.”

Kurtzer submitted a paper to Obama on the question before this month’s presidential elections. He argued that trying to reach bilateral peace agreements between Israel and individual countries in the Middle East, was a recipe for failure as the record of Bill Clinton and George W Bush showed. In contrast, the broader Arab plan “had a lot of appeal”. A leading Democratic expert on the Middle East said: “There’s not a lot of meat on the bones yet, but it offers recognition of Israel across the Arab world.”

Livni, the leader of Kadima, which favours the plan, is the front-runner in Israeli elections due in February. Her rival, Benjamin Netanyahu, the leader of Likud, is adamantly against withdrawing to borders that predate the Six Day war in 1967.

Ehud Olmert, the prime minister, last week expressed his support for Israel’s withdrawal from the West Bank Golan and east Jerusalem.

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