Netanyahu: Root of Palestinian conflict is not territory

However, US Secretary of State John Kerry, who is engaged in efforts to relaunch stalled Israeli-Palestinian peace talks, believes the Arab Peace Initiative could provide a framework for a future peace deal.

Prime Minister Benjamin Netanyahu said Wednesday that an Israeli withdrawal would not bring peace with the Palestinians because the heart of the conflict was their refusal to recognise Israel as a Jewish state.

His remarks came a day after the Arab League announced moves to revive and modify its 2002 peace initiative, drawing praise from Washington and Israel's chief peace negotiator Tzipi Livni but no official response from the Israeli government.

 "The root of the conflict is not territorial. It started a long time before 1967," Netanyahu said in a meeting with foreign ministry officials, referring to the year Israel seized Gaza, the West Bank and east Jerusalem during the Six-Day War.

"You saw what happened when we left the Gaza Strip. We evacuated the last settlers and what did we get? Missiles," he said of Israel's withdrawal from the enclave in 2005.

"The Palestinians' lack of will to recognise the state of Israel as the national state of the Jewish people is the root of the conflict," he said, in remarks communicated by a senior government source.

The Saudi-led proposal, which offers full diplomatic ties with the Arab world in exchange for Israel's withdrawal from land occupied in 1967, now includes a reference to the principle of mutually agreed land swaps, a move hailed by Washington as "a very big step forward."

But Netanyahu has ruled out withdrawing to the "indefensible" 1967 lines, and said Wednesday the move would not solve the conflict, which was about "the very existence of a Jewish state," the source said.

"If we reach a peace agreement I want to know that the conflict will not continue. That there won't be any more Palestinian claims afterwards," Netanyahu told the diplomats.

"The root of the conflict is Acre, Jaffa and Ashkelon and you need to say it. You don't need to apologise. You need to say the truth," he told them.

Palestinian President Mahmud Abbas downplayed Netanyahu's comments

"We have recognised the state of Israel since 1993," he said at a press conference with Serbian President Tomislav Nikolic in Ramallah on Wednesday. "They can call themselves what they want, it's not our business."

"We are in favour of the 1967 borders," he said, but added he would consider small changes.

"When we negotiate the demarcation of the borders, we will look at minor modifications of equal value on both sides if we need to," he said.

However, US Secretary of State John Kerry, who is engaged in efforts to relaunch stalled Israeli-Palestinian peace talks, believes the Arab Peace Initiative could provide a framework for a future peace deal.

Speaking to Haaretz, two foreign ministry sources who attended the meeting with diplomats quoted Netanyahu as saying the demand to recognise Israel as a Jewish state was not a condition for the start of talks, but rather for their conclusion.