THE Israeli prime minister Ariel Sharon wants to annex up to half of the West Bank under an unpublished plan for the Palestinian territories that he is drawing up with close advisers, a senior minister in his government has told The Telegraph.
The remarks by Ephraim Sneh, the transport minister, were a strong indication that Mr Sharon wants to see the creation of a divided and weakened Palestinian entity with far less land than envisaged under previous peace plans.
"As far as I know, the strategy is to annex 50 per cent of the West Bank [for Israel] and this is incompatible with a two-state solution. It is not realistic," said Mr Sneh, a Labour member in Mr Sharon's coalition government.
Danny Ayalon, a senior Sharon aide, said the prime minister would wait for a regional peace conference to discuss his proposals for Palestinian territory.
Mr Sneh was speaking at the end of a week in which Israel began winding up its largest military operation in the West Bank for more than 30 years.
The army said yesterday that it would pull back from the centre of Palestinian cities that it recently occupied and lift curfews.
Two places excluded from the limited withdrawal are the besieged compound in Ramallah of Yasser Arafat, the Palestinian leader, and the Church of the Nativity in Bethlehem. Israel wants the surrender of militants among those holed up at the two locations.
Mr Sharon has played his cards close to his chest over his broader political strategy, saying only that he is prepared to make "painful concessions" to the Palestinians in the interests of long-term peace.
Mr Sneh's comments will deepen the debate about Mr Sharon's plans to create a far diminished, cantonized Palestinian state compared with that outlined in peace talks, and fuel speculation that Mr Sharon and the Israeli Right are hoping to buy time in order to maintain the status quo and retain most Jewish settlements in the West Bank.
Labour and the Right-wing parties - of which Mr Sharon's Likud is the largest - have maintained a united front in the current anti-terror crackdown. However, Mr Sneh indicated that rifts over a future political settlement could cause the coalition to collapse.
Last week, Mr Sharon called for an international peace conference to address Israeli-Palestinian issues, but demanded the exclusion of Mr Arafat.
Mr Ayalon, one of the prime minister's closest advisers, said the proposal was genuine, but he would not be drawn on details of any plans to offer the Palestinians a peace deal.
"Mr Sharon said he is prepared to discuss these issues in a conference and President Bush has declared him to be a man of peace," said Mr Ayalon.
In a series of skirmishes yesterday, an Israeli policeman was shot dead by a Palestinian attacker at a Gaza Strip crossing point. The attacker, found to be wearing an explosive belt, was killed in the exchange.
Another Palestinian wearing an explosive belt blew himself up after being stopped by the Israeli army near the West Bank town of Qalqilya. In the southern Gaza Strip, six Palestinians were wounded in clashes near the border with Egypt.
Saudi Arabia, meanwhile, has guaranteed to increase oil production to make up for any shortfall caused by a possible Islamic oil embargo. The offer will be confirmed when Crown Prince Abdullah meets Mr Bush for the first time in Washington this week.
Iraq recently cut oil supplies to the West in protest at Middle East events, and other predominantly Muslim oil-exporting countries have threatened to follow suit.
Saudi Arabia has the capacity to produce 10.5 million barrels a day within three months, but is currently pumping out only seven million. Its spare capacity of 3.5 million exceeds Iraq's total output.
The offer has been made despite Saudi frustration with United States policy on Israel, Iraq and the war on terrorism.
However, the Saudis and Americans are braced for what one Washington official predicted would be a "tough session" when the Crown Prince and Mr Bush - two men known for straight-talking - meet in Texas on Thursday.
Mr Bush has praised Crown Prince Abdullah's peace plan for the Middle East. However, recent signs that Mr Bush is again under pressure from senior conservative colleagues to cut links with Mr Arafat will cause further frictions.
Donald Rumsfeld, the US defence secretary, and Vice-President Dick Cheney have held talks with Benjamin Netanyahu, the former Israeli premier, on how to proceed if Mr Arafat were removed.
They met as Colin Powell, the secretary of state, was pursuing his ill-fated peace mission to the Middle East that included two unproductive meetings with the Palestinian leader.
King Abdullah II of Jordan is expected to meet Tony Blair in London tomorrow for talks on the peace crisis. The king is meeting other Middle Eastern leaders today.