TEL AVIV, March 30 (RIA Novosti) - Israel will not accept the return of Palestinian refugees even in exchange for peace with the Arab world, Prime Minister Ehud Olmert said in an interview Friday.

The Arab League proposed at a summit in Riyadh Thursday an Israeli withdrawal to its pre-1967 borders, the establishment of a Palestinian state and a "just solution" to the Palestinian refugee problem, in line with UN Resolution 194, in exchange for a peace agreement and normal relations with Arab countries.

"I'll never accept a solution that is based on their return to Israel, any number," Olmert told The Jerusalem Post. "I will not agree to accept any kind of Israel responsibility for the refugees. Full stop."

Responding to the Arab Peace Initiative, Israel's Foreign Ministry said the return of Palestinian refugees would be a threat to Israel's Jewish identity.

"Israel's position with regard to the peace process with the Palestinians is based on fundamental principles, with a central one being the coexistence of two states pursuing national aspirations of their peoples," the ministry said.

Israel also rejected the Arab world's demands that it withdraw from the West Bank, the Golan Heights and East Jerusalem, which has been proposed as the Palestinian National Authority's (PNA) capital, but hailed the initiative, first advanced in 2002, as an opportunity for dialogue with moderate Arab governments.

Echoing the ministry's assessment of the Arab League summit, Olmert said in a separate interview that Israel could sign a peace accord with all of its foes in five years given favorable circumstances, including the results of the summit.

"There is a real opportunity for Israel to sign an all-embracing peace accord with all its foes," Olmert told the Israeli Yedioth Ahronoth newspaper without elaborating.

The Arab initiative was a further effort to resolve the Israeli-Palestinian conflict, which has been the focus of the "roadmap" peace plan proposed by the Quartet of mediators - the United States, the UN, the EU and Russia.

The plan urges the PNA to renounce violence and recognize Israel, and calls on Tel Aviv to end West Bank expansion. The plan, which has largely stalled, also stipulates the eventual creation of a Palestinian state.