sraeli Foreign Minister Avigdor Lieberman has branded the Arab Peace Initiative as "dangerous" because it requires the Jewish state to allow Palestinian refugees to return to its borders, a senior official said Wednesday. "Lieberman considers the Arab Peace Initiative as dangerous and as a threat to Israel because it includes the clause on the Palestinian refugees," the official told AFP on condition of anonymity.

"The foreign minister has nevertheless not rejected the initiative as a whole," he said.

The Arab Peace Initiative, presented by Saudi Arabia in 2002, offers Israel full normalization of ties in return for its withdrawal from occupied Arab land and the creation of a Palestinian state.

It also calls for "a just solution to the problem of Palestinian refugees to be agreed upon in accordance with the UN General Assembly Resolution No. 194," which the Jewish state has repeatedly rejected.

The fate of the Palestinian refugees and their descendants who were driven out of their homes in what is today Israel in the 1948 war - now numbering 4.6 million - is a core issue in the Middle East conflict.

Lieberman has refused to endorse the 2007 US-backed deal agreed during a conference in Annapolis, Maryland to re-launch negotiations with the Palestinians.

The hardline position, coupled with Prime Minister Benjamin Netanyahu's refusal to publicly endorse the creation of a Palestinian state, has raised fears that Israel's new cabinet is on a collision course with US President Barack Obama's administration that has vowed to push the faltering Middle East peace talks.

Netanyahu is scrambling to shape his cabinet's policy on the Middle East peace talks ahead of a planned meeting with Obama in Washington in May.

Israeli Defense Minister Ehud Barak has proposed that the government should hold parallel peace talks with both Syria and the Palestinians based on the Arab initiative, but Lieberman has rejected the proposal, according to one official.