RIYADH: Conflicting signals are emerging from Tel Aviv on the Riyadh Declaration.

Although Israel has rejected some of the elements of the peace initiative, it seems very keen to grab the opportunity for establishing direct contacts with Saudi Arabia. That would be a plum prize for the Israelis, most analysts agree.

Arab leaders adopted the declaration at a summit here earlier this week. The declaration offers Israel normalisation of relations in return for a returns to the pre-1967 borders and recognising the Palestinian refugees’ right to return to their homes in what is now Israel.

Israeli Prime Minister Ehud Olmert has confirmed he wants to start a dialogue with Saudi Arabia and other moderate Arab countries.

In an interview with the Haaretz newspaper, Mr Olmert said he would be happy to take part in a conference that would support direct negotiations between Israel and the Palestinians.

"A bloc of states is emerging that understands that they may have been wrong to think that Israel is the world’s greatest problem. That is a revolutionary change in outlook,” Mr Olmert said.

"There are interesting ideas there, and we are ready to hold discussions and hear from the Saudis about their approach and to tell them about ours,” he added.

"Saudi Arabia is the country that in the end will determine the ability of the Arabs to reach a compromise with Israel,” Mr Olmert said.

"The Riyadh summit is certainly a serious matter. We do not delude ourselves - they want us to go back to the 1967 borders and they also want the right of return. We were not surprised; we understood it would be this way. The content is important, but it is also important to relate to the atmosphere, positioning and direction.”

In another interview published on Friday in the English-language daily, The Jerusalem Post, Mr Olmert reiterated opposition to giving Palestinian refugees the right to return.'

“`I'll never accept a solution that is based on their return to Israel, any number,” Mr Olmert said. The Israeli prime minister told the daily, Yediot Ahronot, that there is `a real chance that within five years Israel will be able to reach an inclusive peace deal with its enemies’.

However, Israel’s official response to the Riyadh Declaration and the offer for peace in return for occupied land was lukewarm.

The response ignored the content of the declaration and focused on the call by moderate Arab nations for a dialogue with Israel.

Defence Minister Amir Peretz said on Thursday Israel should derive satisfaction that the Arab consensus adopted the principle of ending the conflict and normalisation with Israel.

In the wake of the developments, the chances of a greater Saudi-Israeli interaction have brightened. Riyadh’s readiness to head a working committee of Arab states charged with promoting the peace initiative could pave the way for Arab states with no ties to Israel to open up their own official diplomatic channels, analysts say.

The Israeli and western press have been reporting in past months of several informal meetings between Israeli officials and Prince Bandar bin Sultan, who has led a round of shuttle diplomacy in the region in recent months concerning Iran, Iraq and Lebanon.

Saudi Arabia has denied any contacts with Israel.

According to Reuters, diplomats in Riyadh confirm Prince Bandar’s meetings, but say it is not clear if they were approved by King Abdullah or not. Prince Bandar, a former ambassador to Washington, is seen as a maverick.