By Corinne Heller JERUSALEM, Oct 4 (Reuters) - A cabinet minister from Prime Minister Ehud Olmert's party voiced support on Wednesday for peace negotiations on the basis of a Saudi initiative that has long been a non-starter for Israeli leaders. "What Israel has to do is set the international agenda, certainly on the Israeli-Palestinian issue. By saying this, I believe we must grab the bull by the horns," Justice Minister Meir Sheetrit of the centrist Kadima party told Israel Radio. Israel, Sheetrit said, should tell moderate Arab countries, including Saudi Arabia, "let's talk about your initiative". Sheetrit is widely seen as a close Olmert ally. Speaking hours before a scheduled visit by U.S. Secretary of State Condoleezza Rice, he said he had proposed to Olmert "to invite the Saudis to come to Israel" to discuss the peace plan. A spokeswoman for Olmert was unavailable for comment on the minister's remarks, which represented the strongest expression of support yet from a member of the Israeli cabinet for the so-called Saudi initiative. The plan, drawn up in a 2002 Arab League summit, calls for Israel to quit all land conquered in the 1967 Middle East war, the formation of a Palestinian state and a solution for Palestinian refugees who fled what is now the Jewish state. In exchange, the Palestinians and Arab nations would establish peaceful relations with Israel. Israeli leaders have long said Israel will never relinquish all of the territory it has occupied and return to narrow borders that existed before the 1967 conflict. However, Olmert struck a different tone in an interview last month with Israel's Yedioth Ahronoth daily. "I am very impressed with different processes and statements that are connected to Saudi Arabia, some that have been stated publicly and others as well," Olmert, stopping short of endorsing Riyadh's plan, told the newspaper. Palestinians want all of the West Bank and Gaza Strip for a future Palestinian state, with East Jerusalem as its capital. SETTLEMENT BLOCS "No one ... can expect that Israel will uproot the big settlement blocs," Sheetrit, echoing Olmert's policy, said about large Jewish enclaves in the occupied West Bank. "That is unrealistic. Everyone understands that. The Saudis understand that. Abu Mazen understands that and the Palestinians understand that,", he said, referring to moderate Palestinian President Mahmoud Abbas. But Sheetrit said it was time to negotiate with "moderate Arab forces", including Abbas and excluding Hamas, the Palestinian militant group that came to power in January. "We are talking about a full peace. We want a full peace. We do not necessarily have to accept every detail of the initiative -- withdrawal to the 1967 borders. But let's talk," he said. Israeli Foreign Minister Tzipi Livni has also spoken of engaging a moderate Arab bloc which she said, like Israel, harboured deep concerns over the prospect of a nuclear Iran. Last week, an Israeli newspaper reported Olmert had met a member of the Saudi royal family. Olmert, sidestepping a full denial, said there had been no meeting meriting headlines.
