(Adds Saudi comment)

By Adam Entous

JERUSALEM, April 2 (Reuters) - Israeli Prime Minister Ehud Olmert's call for a regional conference with Arab leaders drew a sceptical response on Monday from Saudi and Palestinian officials and diplomats who said it was a diversionary tactic.

Olmert proposed holding the conference as a possible alternative to U.S.-backed plans for talks through an Arab League working group that could try to negotiate details of a land-for-peace accord, diplomats involved in the matter said.

But Saudi officials say the kingdom would only consider talks if Israel clearly accepted the Arab peace initiative without any conditions. A statement issued after Monday's Saudi cabinet session stated the kingdom's position.

"Israel should realise that peace requires that it ends its constant violations and inhuman aggression towards the Palestinian people before anything else, and accept legal decisions passed by world bodies," it said.

The United States, Egypt and others have been pressing Olmert to agree to hold talks as soon as possible with the planned Arab League working group, but he has been reluctant to do so, the senior diplomats said, on condition of anonymity.

"He is making an alternative proposal (to hold a regional conference) because he knows it won't happen. He is sidestepping the issue," said a diplomat close to the Israeli deliberations.

Nimer Hammad, a political adviser to Palestinian President Mahmoud Abbas, called Olmert's proposal "a dodge," adding that "he seeks normalisation without paying the price."

At the Riyadh summit, Arab leaders revived a 5-year-old peace plan that offers Israel normal ties with all Arab states in return for a full withdrawal from the lands it seized in the 1967 Middle East war, creation of a Palestinian state and a "just solution" for Palestinian refugees.

Egyptian Assistant Foreign Minister Hani Khallaf said on Monday that an Arab League committee will set up a working group to contact Israel about the land-for-peace initiative.

POSITIVE POINTS

Olmert has said he saw positive points in the proposal.

But Israel, citing demographic and security concerns, opposes the return of Palestinian refugees to their former homes in what is now the Jewish state. It also wants to hold on to major settlement blocs in the occupied West Bank.

"The Arab initiative ... is asking too high a price from us, an intolerable price," Tzachi Hanegbi, chairman of a key Israeli parliamentary committee and a senior member of Olmert's Kadima party, told Israel Radio.

But Hanegbi said it would be a mistake "to close the door before the start of talks."

Diplomats close to the Israeli deliberations said Olmert's position stems from his reluctance to agree to detailed negotiations at this time that could be spearheaded by a small working group of select Arab states.

"He wants normalisation before he starts negotiations. They want normalisation after an agreement has been reached," one diplomat said.

The Arab League has not spelled out what the proposed working group would do and what role, if any, Israel might play.

The members of the working group would be drawn from an 11-member Arab League committee, set up at last week's Arab summit, and the committee includes Egypt and Jordan, the two Arab countries which have signed peace treaties with Israel. (Additional reporting by Andrew Hammond in Riyadh, Jonathan Wright in Cairo, Jonathan Saul in Jerusalem and Mohammed Assadi in Ramallah)

AlertNet news is provided by