By Adam Entous

JERUSALEM, April 16 (Reuters) - Israel said on Monday it was ready to start talks based on a Saudi Arabian land-for-peace initiative but made clear it wanted Riyadh and other Arab League members with no formal ties to the Jewish state to take part.

"I'm ready to sit with them on the basis of the Saudi plan. And I'm ready to listen very carefully to their proposal on the basis of this plan and to see how we can work together to ultimately find common ground," Prime Minister Ehud Olmert told the Canadian Broadcasting Corporation in an interview.

The comments came ahead of a meeting in Cairo on Wednesday of an Arab League committee expected to set up several working groups to promote the 2002 peace initiative, including one that would hold contacts with Israel.

Under U.S. pressure, Olmert signalled this week that Israel would be prepared to take part in talks with the working group, which was expected to include countries like Egypt and Jordan that already have formal relations with Israel.

Saudi Arabia was not expected to join directly.

Diplomats have sent mixed messages about whether this working group could be charged with negotiating with Israel over the details of the initiative, which offers normal relations to the Jewish state in return for land occupied since 1967.

Egypt's foreign minister said at the weekend the working groups were not "mandated to negotiate", but other diplomats in the region said initial contacts could lead to direct negotiations.

Olmert signalled his support for the talks when he told his cabinet on Sunday that he was "willing to hold a dialogue with any grouping of Arab states about their ideas".

But Israeli officials made clear that they want the Arab League to include a wider range of countries, including those like Saudi Arabia that do not have formal ties with Israel, in any future talks.

CENTRAL ROLE

Olmert said Saudi Arabia could play a central role. Even though the kingdom does not have formal relations with the Jewish state, Olmert strongly hinted that unofficial contacts have already taken place.

The Saudis have rejected Olmert's call for a regional conference that would include them and other Arab states.

Egyptian President Hosni Mubarak, speaking in Paris, said the broader Arab world will not agree to normalise relations with Israel before a peace deal is reached.

"We can come to a solution through negotiations," Mubarak said. "But it's not possible to normalise and then start talks."

The land-for-peace initiative, relaunched at an Arab League summit in Riyadh, 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.

Olmert has said that he sees positive points in the Saudi-led peace initiative. But Israel opposes the return of Palestinian refugees to their former homes in what is now the Jewish state, and wants to hold on to major settlement blocs in the occupied West Bank. (Additional reporting by Allyn Fisher-Ilan)

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