TEL AVIV, June 6 (IslamOnline & News Agencies) - Washington has proposed Israel dismantle its illegal settlements in the occupied West Bank and Gaza in return for a Palestinian renunciation of the right of return for millions of refugees, Israeli Foreign Minister Shimon Peres said Wednesday, June 6.

“There are new ideas in the air from the United States, under which Israel would give up all its settlements and the Palestinians would renounce the refugees’ right of return,” Peres said, quoted by Agence France-Presse (AFP).

Since Israel's creation in 1948, about 3.7 million Palestinians have been registered as refugees. They demand the “right of return” to their homes in the Palestinian land occupied by Israel, but Israel has adamantly objected under the pretext this would destroy the Jewish character of its state.

Israel's daily newspaper, Haaretz, reported Thursday that the U.S. State Department had drafted a peace initiative that calls for the establishment of a Palestinian state within the full West Bank and Gaza Strip, with slight border adjustments.

The plan has a three-year timeframe for implementation.

It also calls for an overhaul of the Palestinian Authority and a Palestinian declaration renouncing the refugees’ right of return, according to Haaretz.

But a senior U.S. official said Thursday that the United States is still elaborating its policy on the Israeli-Palestinian conflict.

President George W. Bush is set to meet Egyptian President Hosni Mubarak Friday and Saturday, June 6-7, at his Camp David retreat north of Washington and will then host Israeli Prime Minister Ariel Sharon in Washington Monday, June 10.

CIA chief George Tenet and other U.S. officials are currently engaged in efforts to resolve continuing violence between Israelis and Palestinians.

However, Bush would offer no plan for peace during his weekend talks, according to the official.

“It's a bit misleading to speculate or expect a ‘Bush plan’, but what we are thinking of doing is laying out a more specific roadmap, a set of ideas ... parameters,” leading towards Bush’s stated vision of a separate Palestinian state alongside a secure Israel, said the official.

The Mubarak summit presents “an opportunity for President Bush to receive President Mubarak's advice and counsel as we are going through our own internal deliberations about the next steps in the Middle East,” the official added.

The U.S. official said it was not up to the United States to determine whether Palestinian President Yasser Arafat continued to lead the Palestinian people, but expressed support for reforming the Palestinian Authority.