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US Secretary of State John Kerry on Tuesday hailed a shift in the Arab League position to accept for the first time the idea of land swaps between the Palestinians and Israelis in any peace deal.
Kerry said the Arab League had said it could accept Israel's 1967 borders "with adjustments to reflect mutually agreed upon land swaps recognizing some of the changes that have taken place. That is a very big step forward."
The new top US diplomat has suggested the original 2002 Arab Peace Initiative, put forward by Saudi Arabia, could act as a model for a future peace deal between the Arab world and Israel.
But the original proposal only talked about a future Palestinian state based on the borders prior to the June 4, 1967 Israeli offensive in which Israel captured East Jerusalem and the West Bank.
After talks in Washington on Monday with Kerry, the Arab League said a future deal could involve a "comparable and mutual agreed minor swap of the land" to reflect the realities of the shifting populations on the ground.
Israel's lead peace negotiator Tzipi Livni praised Monday's comments as an "important" concession by the Arab League, saying it sent a message to all Israelis that the Arab world as a whole was searching for a solution.
"I think therefore it's significant," Kerry said after talks with his Spanish counterpart Jose Manuel Garcia-Margallo.
"We have a lot of homework to do, a lot of tough hurdles to get over. Each step forward is the way you get there.
"Yesterday was another step. We're going to continue to march forward. And try to bring people to the table despite the difficulties and the disappointments."