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Source: http://www.jta.org/cgi-bin/iowa/news/print/20070305saudiinitiative.html
Israel, Saudi Arabia Explore Changing Saudi Peace Plan
[JTA] Leslie Susser - The Saudis have quietly been exchanging ideas with Israeli leaders on changes in the 2002 Saudi peace plan that would make it more palatable to Israel. The main sticking point for Israel is the Saudi plan's prescription that would give Palestinian refugees a right to return to Israel proper, which virtually all Israelis see as shorthand for the destruction of the Jewish state through a demographic onslaught. In the secret talks with Prince Bandar, Israel has made it clear that the refugee option is totally unacceptable. Foreign Minister Tzipi Livni argues that in the context of a two-state solution, it's logical that Palestinian refugees would return to a Palestinian state, not Israel. According to unconfirmed Israeli press reports, Saudi King Abdullah has ordered an appropriate change in the text to give refugees a choice: either to return to the Palestinian state or stay where they are - in Jordan, Lebanon or Syria - and receive financial compensation.