The following are relevant excerpts from a Ma'ariv report published on August 17th.

The issue of refugees
Regarding the issue of absorbing Palestinian refugees in Israel, Mahmoud Abbas demands the return of 100,000 Palestinians within ten years. For the Palestinians, this is a serious concession, as the offer is "cheap" when compared with the millions of refugees, residing mostly in Lebanon. Nonetheless, Olmert objects to these figures/ Israeli political sources have claimed that Olmert agreed that 1,500 refugees would return every year, amounting 15,000 in ten years, and refused to their return on the grounds of family reunification, but rather on the grounds of humanitarian considerations.

Haaretz reported that Olmert offered Abbas the return of 20,000 refugees, but Olmert's office dismissed the report. The solution for the refugee issue closely resembles the Geneva Initiative formula, according to which Israel must be part of the solution but will have authority to decide how many refugees to accept. Additionally, those who prefer not to return would be eligible for compensation from a third state. The Prime Minister's Office refused to confirm the number and claimed it would be a strictly symbolic figure. 

The issue of Jerusalem
In exactly a month, Primaries will be held in Kadima. In other words, this is the political window of opportunities remaining for the prime minister before he leaves his Jerusalem office. During this time, Olmert would like to reach an agreement of principles with Palestinian Authority Chairman Abbas. The agreement, if eventually reached, would include the core issues: permanent borders, refugees, and—that's right—Jerusalem.

It's true that Jerusalem has not been discussed in Foreign Minister Tzipi Livni's official talks with Abu-Alaa, but in talks between Olmert and Abbas Jerusalem has been brought to the table—based on the principle of "two capitals in Jerusalem for two peoples."

Olmert has proposed to Abbas that thew agreement of principles will state that Jewish neighborhoods will be recognized as under Israeli sovereignty, while Arab neighborhoods such as Shuafat will be placed under Palestinian sovereignty. As for the holy sites—including the Temple Mount and Mount of Olives, which constitute the main bone of contention—Olmert proposed that a decision on the matter will be delayed to a later date, and that a joint body of Israelis and Palestinians would be established to manage the historic basin for an agreed period of time, during which the sides would strive for a compromise.

Soruces within the Prime Minister's Office claimed Olmert's proposal in effect postponed the whole issue of Jerusalem, but a high-level official confirmed that this was the outline under discussion between Olmert and Abbas and added that "Abbas unequivocally stressed to Olmert that no agreement could be reached without Jerusalem."

The issue of land swap
Haaretz revealed last week that Olmert has agreed to an Israeli withdrawal from most of the West Bamk—approximately 93%. In return, Israel would hand over lands in the Negev measuring some 5.5% of the West Bank, as part of a land swap. A political official explained that Olmert objects to a land swap on a 1:1 ratio. Abbas, who is willing to reach such an agreement even before Olmert leaves office, would green-light an agreement of principles only if it is detailed—clear borders with territorial continuity backed by maps and percentages; a land swap on a 1:1 ratio; the division of Jerusalem; and an agreed solution to the refugee problem. Olmert claims that the safe passage is part of the land swap, while Abbas claims that the passage is under Israeli sovereignty, and therefore is not included in the land swap.

The issue of prisoners
Meanwhile this morning, the government is expected to approve the release of 200 Palestinian prisoners and detainees as a gesture to Abbas, irrelative to the release of abducted soldier Gilad Shalit. Prime Minister Olmert, in his meeting with Abbas in Paris as part of the conference of Mediterranean states, agreed to his request that prisoners be freed, a step aimed at strengthening the PA chairman opposite Hamas and conveying a message of dialogue.

As for negotiations to free Gilad Shalit, they are still at a deadlock. Hamas representatives have not arrived in Cairo for meetings, while the Israeli in charge of negotiations, Ofer Dekel, has visited the Egyptian capital several times in an effort to accelerate talks.

Hamas' demands for freeing Shalit are known: 450 prisoners termed by Israel as "arch-murderers" and 500 others. Israel has thus far approved the release of 70 names off the list, but Hamas has sent a message through Egypt that no progress can be made as long as the Rafah crossing is closed.