Prime Minister Ehud Olmert and Foreign Minister Tzipi Livni, however, support part of the Saudi plan but reject the Arab initiative, which backs the Palestinian right of return, Jerusalem as the Palestinian state's capital and a full return to the 1967 borders.
Defense Ministry officials have been closely following the discussion at the Saudi summit in the past two days. During Thursday's discussion, Peretz said that Israel should be satisfied with the fact that the Arab consensus adopted formulas for ending the conflict with Israel.
He defined the Arab initiative as "an important initiative" and told the meeting attendees that "we must view the glass as half full. It is a mistake to ignore it and leave the arena for others."
Peretz reiterated Israel's need to launch its own diplomatic initiative, in order to discuss the principles for a permanent agreement with Palestinian President Abbas.
He believes that such an initiative should be carried out in cooperation with the Quartet and representatives of the Arab League states.
"The Arab initiative is a basis for discussing the permanent agreement," Peretz said.
Hinting at Hamas, he added that "we must view any Palestinian who clearly accepts the Saudi initiative as one who has taken an important step toward a dialogue with Israel, without ignoring the demand to release Gilad Shalit."
'Peretz rushing to accept plan despite obstacles'
The Foreign Ministry, however, issued a vague statement regarding the Arab summit in Riyadh, which adopted the Arab peace initiative from 2002.
"Israel believes in peace and seeks peace and good neighborly relations, both with the Palestinians and all the states in the region," the statement said. "Israel is interested in a dialogue with the Arab states seeking peace with us, in a bid to reach normalization and cooperation, with the hope that the Riyadh summit will support this.
"Israel's stance regarding the peace process with the Palestinians is based on basic principles, focused on the existence of two states, with each state providing the needs of its people – Israel for the Jewish people and Palestine for the Palestinian people.
"These will be two states living in peace, without threats of terror and violence. For that we need a direct dialogue between Israel and the Palestinians. Israel also believes that the moderate Arab countries can fulfill a positive role encouraging cooperation. A dialogue between them and Israel can contribute in an Israeli-Palestinian route."
Officials at the Prime Minister's Office in Jerusalem are still sticking to this traditional stance, which in effect rejects the Arab initiative. They do not accept Peretz's stance.
Diplomatic sources said that Peretz was rushing to accept the Arab initiative in spite of its obstacles.
"We welcomed parts of the Saudi initiative, and not in vain. It is a basis for the beginning of a dialogue, but the Arab initiative contains demands that Israel is unwilling to accept, particularly the Palestinians' right to return to their homes within the Green Line," a source at the Prime Minister's Office said.