The Israeli leader made the offer during a meeting with Mr Abbas in occupied Al Quds.
Mr Abbas had demanded Israel lift its siege of Yasser Arafat, but the Israeli prime minister said he was only willing to let Mr Arafat go to Gaza City, although he would not guarantee the veteran Palestinian leader the right to travel freely, the source said.
Mr Arafat has been pinned down in his Ramallah headquarters since Dec 2001, when Israeli troops in tanks raided the city in response to a wave of suicide bombings.
A high-ranking Israeli official said: “There is nothing new in Sharon’s position.
“We have already said in the past that we are ready to let Arafat set himself up in Gaza City, but he cannot travel between Gaza City and the West Bank,” the official said.
Although Mr Arafat is now technically free to leave his offices, such a move would clear the way for Israel to arrest wanted Palestinians who have taken refuge with him.
‘VERY SUCCESSFUL’: An Israeli minister termed the meeting “very successful”.
“I was especially impressed by the statement of the Palestinian information minister (Nabil Amr) that the Palestinians want their children to go to university and not to end their lives as suicide bombers,” Justice Minister Yossef Lapid told journalists.
Earlier, Mr Abbas and Mr Sharon addressed their peoples together for the first time on Tuesday, standing side by side to pledge their commitment to peace.
Speaking before their meeting, Ariel Sharon said Israelis did not want to rule Palestinians or decide their future, but that peace would not be possible if Palestinian “terror” continued.
He said he was willing to pay a “painful price” for peace.—Reuters