JERUSALEM, 11 March : Israeli Prime Minister Ehud Olmert on Sunday said he was ready to ''treat seriously'' a dormant Saudi initiative calling for a comprehensive peace agreement between Israel and the Arab world in exchange for a full Israeli withdrawal from lands captured in the 1967 Mideast War.

Mr Olmert spoke to his Cabinet ahead of a meeting with Palestinian President Mahmoud Abbas.

Both sides acknowledged they expected no major breakthroughs ahead of the formation of a new Palestinian government in the coming weeks.

The talks, following an inconclusive meeting on Feb 19 attended by US Secretary of State Condoleezza Rice, are part of US-backed efforts to prod the sides to a return to peace talks.The Saudi peace initiative, which aimed to solve the Palestinian issue by offering Israel a comprehensive peace, was first proposed in 2002 but never got off the ground. It is expected to be high on the agenda at an Arab League summit later this month in Riyadh.

The Saudis, who have never backed away from the initiative, have been pushing hard for other regional countries, many of whom also have endorsed it, to gather behind the initiative in strength to push the peace process forward.

Mr Olmert told his Cabinet on Sunday that Israel is following developments in the Arab world ''with the utmost attention'' and noted ''positive developments'' among moderate Arab countries.

''We have said more than once that the Saudi initiative is a matter which we would be ready to treat seriously and we have not altered our position,'' he said. ''We hope very much that at the meeting of heads of Arab states to take place in Riyadh, the positive elements expressed in the Saudi initiative will be revalidated and will perhaps improve the chances of negotiation between us and the Palestinian Authority.''

The Saudi push comes at a time when many Arab moderate governments are worried about rising tensions in the region and view progress on the Palestinian-Israeli issue as a way to lower tensions and also to blunt Iran's growing influence.

Israel in the past has expressed reservations about the Saudi plan. In particular, Israel has resisted calls for a full withdrawal from the West Bank and east Jerusalem -- both captured in the 1967 war.

Israel also objects to the Saudi plan's implicit endorsement of the ''right of return'' for Palestinian refugees displaced during the establishment of Israel in 1948. There are hundreds of thousands of refugees and their descendants throughout the Middle East, and Israel says their return to former properties in what is now Israel would threaten Israel's existence as a Jewish state.

Despite such concerns, Israel is interested in improving ties with moderate Arab countries to counter the rising influence of Iran and radical anti-Israel groups, such as Hamas and Hezbollah, in the region.—AP