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Although negotiations were formally opened in May 1996, to date no substantive final status discussions have yet occurred. However, it is clear--from second track dialogue projects, from discussions in and around the RWG and Continuing (Quadripartite) Committee, and from the known positions of the regional parties--that four sets of issues will be at the core of any possible solution of the refugee issue.
The Right of Return
The Palestinian "right of return" has been a central element of the Palestinian position throughout post-Madrid negotiations on the refugee issue. The right of return is expressed in terms of both the moral claim of refugees to return to homes from which they have been displaced, and by reference to a number of United Nations resolutions. The most important of these is General Assembly Resolution 194 (III) of December 1948, which inter alia declares that "refugees wishing to return to their homes and live at peace with their neighbours should be permitted to do so at the earliest practicable date..".
Israel has rejected the "right of return," and consequently opposed basing any negotiations on the principles of UNGAR 194. Typically, Israeli spokespersons have argued either that Israel bears little moral responsibility for the flight of Palestinian refugees in 1948, and/or that a de facto "population transfer" occurred as Israel accepted post-1948 Jewish refugees from the Arab world. Moreover, mainstream Israeli commentators are virtually unanimous in their assessment that no Israeli government would ever countenance substantially changing the demographic balance of the state--the very raison d'être of which is its Jewish character.
Despite this large gap in official positions, it is possible to discern some middle ground between some Israeli and Palestinian analysts of the refugee issue. Many Palestinians--both intellectuals and officials--have spoken of a Palestinian right of return that would be understood to mean a return to national soil (in the West Bank and Gaza), rather than a return to 1948 homes. Ziad Abu Zayyad, for example, suggests that "One must distinguish between, on the one hand, the "right of return" as a principle, and on the other hand, exercising that right by literally returning to Palestine as a national homeland, and to that same home, piece of land, or grove which a certain Palestinian owned before 1948, as a private individual property." Rashid Khalidi--emphasizing what he terms "attainable" (rather than "absolute") justice--suggests that while "it must be accepted that all Palestinian refugees and their descendants have a right to return to their homes in principle..." it must be "equally accepted that in practice force majeure will prevent most of them from being able to exercise this right."
Others have maintained somewhat more ambiguity. Salim Tamari (a member of the Palestinian delegation to both the RWG and the Continuing Committee) approvingly quotes Khalidi's views, expressing them in the following terms:
Israel's acceptance, in principle, of the right of Palestinians and their descendants to return to their homes. The Palestinians, in exchange, would recognize that this right cannot be exercised inside the 1948 boundaries but in a state on Palestine [in the West Bank and Gaza]. As part of these mutual concessions, Israel should take into its territory several tens of thousands of refugees, particularly those who have family members living inside Israel.
He also adds his own view, however, that the "right of return to a mini-Palestine" should not be "bartered against the right of return to Israel itself." In a similar vein, Abbas Shiblaq (another periodic member of the Palestinian RWG team) has noted that "The right of return for Palestinian refugees will be basically applied to the future Palestinian state in areas occupied in 1967." However, the Shaml Newsletter (of which Shiblaq is editor) declares that "Return to Palestinian National Authority areas is not a substitute to the right of return of the refugees of 1948"--while also acknowledging that "it would be naive to assume that political considerations and developments of the last fifty years will not have an impact on the way that this right might be implemented."
The responsiveness of Israelis to this position has been mixed. On the one hand, Likud spokespersons have rejected outright even a Palestinian "return" to the West Bank and Gaza. In the view of Ariel Sharon:
If these people find themselves resettled once again in miserable refugee camps in Judea, Samaria and Gaza, gazing out from them upon their towns and the remains of their former villages, the tension and anger will be enormous.
We cannot count on their wanting to stay put in their current places of residence, whatever the government placatingly tells us....
The Palestinian refugee problem is a tragedy the Palestinians brought upon themselves. But one tragedy must not be replaced by another.
If we want to continue living in this country, a solution to the refugee problem must be found elsewhere - even if it goes against the Camp David accords.
Similarly, Netanyahu advisor Dore Gold has cited Israel's "demographic security" as the consequent need to prevent "a situation where the Palestinian Authority floods Judea and Samaria with [returning] refugees."  Indeed, the policy guidelines of the present Israeli government explicitly state:
The Government will oppose the establishment of a Palestinian state or any foreign sovereignty west of the Jordan River, and will oppose "the right of return" of Arab populations to any part of the Land of Israel west of the Jordan River. 
On the other hand, a number of influential Israelis have been open to the idea--provided that Palestinians explicitly abandon claims of a right of return to 1948 areas. Mark Heller, for example, has suggested that, given the impossibility (and from his perspective, undesirability) of implementing any "right of return" to the refugees' original homes within Israel proper, Palestinian refugees would instead be free to "return" to a Palestinian state in the West Bank and Gaza. This might be accompanied by the admission of some former Palestinian refugees to Israel on humanitarian grounds. Shlomo Gazit also suggests that the refugee issue be resolved through the establishment of an independent Palestinian state in the West Bank and Gaza and the establishment of a Palestinian "Law of Return" under which "every Palestinian in the diaspora so wishes would be receive Palestinian citizenship, carry a Palestinian passport that would grant him international recognition and rights, and, if need be, the right to immigrate to the new state." By contrast, Gazit is personally less willing than Heller to consider the "return" of a token number of Palestinians to 1948 territories on humanitarian/family reunification grounds, although he does include it as a possible Israeli policy option. Even Shimon Peres, while emphasizing the resettlement of Palestinian refugees in their current place of exile, leaves the door open for this sort of arrangement, suggesting that "once a permanent settlement has been worked out, the Israeli government should have no objection to free movement into and out of the areas included in the Palestinian-Jordanian confederation."--and that, furthermore, "the success of negotiations and the positive atmosphere thus created will make it easier for Israel to show goodwill in resolving the question of family reunification." An unofficial 1996 understanding between Labor's Yossi Beilin and Palestinian negotiator Abu Mazen suggested that the return of Palestinian refugees would be focussed on the West Bank and Gaza. This possibility was also held open in a 1997 unofficial paper developed by Beilin and Likud MK Michael Eitan.
The implications of this would vary across the diaspora. In Lebanon--where most Palestinians are presently stateless--the provision of Palestinian citizenship to any Palestinians electing to remain in that country might serve to assuage some Lebanese concerns regarding the political consequences of the Palestinian presence. Much the same would apply in Syria. In Jordan, however, Palestinians overwhelming hold Jordanian citizenship. Some Jordanian officials have suggested that dual citizenship would not be an option, and that Palestinians would have to choose one political identity or the other in the event of a final settlement. However, it is also possible that this issue would be resolved through the formation of a future Palestinian-Jordanian confederation, which at times has been a declared aim of both parties.
With regard to Israel, some Israelis have expressed concern at the idea that its Arab citizens might opt for Palestinian citizenship if the option were available to them. It is questionable how many would do so, however--particularly since under these circumstances Israel would presumably excerise its sovereign right to deny dual citizenship, and could easily establish additional legal disincentives.
A second essential in final status resolution of the refugee issue is compensation--or, more accurately, the issue of both compensation (monies paid for lost property) and reparations (monies paid in recognition of the historical injustice which created the refugee issue). UNGAR 194 (III) emphasized the former, proposing that compensation should be paid for the property of those choosing not to return and for loss of or damage to property which, under principles of international law or in equity, should be made good by the governments or authorities responsible. Estimates of potential Palestinian compensation/reparation claims have varied widely, although they are typically in the tens of billions. Rashid Khalidi, for example, notes:
A third element is reparations for all those who will not be allowed to return, and compensation for those who lost property in 1948. Given that most refugees will not be able to return, the sums involved are large indeed, according to the most authoritative recent estimate of property losses alone. Depending on the criteria used, they range from $92 billion to $147 billion at 1984 prices, when the study was done [Kubursi in Hadawi, 1984, p.183]. Even if one uses an entirely different approach, $20,000 per person for an arbitrarily chosen figure of 2 million eligible refugees and their descendants yields a figure of $40 billion. However, lest this seem like a great deal of money, we should recall that it amounts to little more than a decade worth of US aid to Israel.
Such estimates are typically based on estimates of Palestinian losses in 1948, or perhaps--as with Khalidis figure of $40 billion, or Shlomo Gazits suggestion that Israel might pay up to $7-10 billion in compensation, or alternatively $10,000 per family--an attempt to place an appropriate price-tag on a historical injustice. However, some have raised questions as to what financial resources might be available to finance compensation payments. At a time when only $2.5 billion (about a third of it in the form of loans) has been pledged to support the entire Oslo process in the West Bank and Gaza--indeed, at a time when the international community seems unwilling or unable to reliably cover even the recurrent budget deficit of the PA--the availability of tens of billions of dollars for refugee compensation is uncertain. 
In addition to the issue of available resources, there are a number of questions surrounding who receives compensation:
Arab host countries have also rejected the option of resettlement, although with varyting degrees of vehemence. The Lebanese government strongly imposes "tawtin", or permanent implantation, of its present Palestinian population. This view is generally shared across the Lebanese political and sectarian spectrum: According to one survey, three quarters of Lebanese opposed resettlement, and a similar proportion believed that it would have damaging political or economic consequences. In Jordan, by contrast, Palestinians already enjoy full political and social rights as Jordanian citizens.
Several factors would likely shape the propensity of Palestinians to repatriate to a Palestinian state:
Without knowing the contents and context of any final resolution of the refugee issue, it is impossible to know what proportion of Palestinians might remain in the diaspora after a settlement. Donna Arzt suggests the following targets (allowing for natural increase):
Repatriation and Resttlement of Palestinian Refugees
|1996 population||2005 population|
|West Bank and Gaza||2,080,000||2,850,000|
|other Middle East states||446,600||965,000|
|non-Middle East states||452,000||900,000|
Such calculations are predicated on the assumption that Israel would accept some 75,000 1948 refugees under the rubric of family reunification:
...based on discussions with both Palestinian and Israeli moderates, I believe it will be possible for an Israeli Labour Government to accept between 50,000 and 100,000 returnees to Haifa, Jaffa and other Palestinian ancestral homes within Israel, so long as there is a concomitant commitment by Israel's neighbors to offer permanent resettlement to comparable numbers in their own countries. (One hundred thousand is the figure that Israel agreed to readmit back in 1949. That was a much greater percentage then, relative to Israel's Jewish population at that time and relative to the Palestinian population of the time than it is in today's demographic framework.) These returnees to Israel would be screened to preclude any who have previously engaged in terrorism and be required to demonstrate proof of original residence there, as well as agree to live in peace.
Arzt's figures also assume that the Gulf states reverse their current policy of reducing the number of Palestinian residents, and that Western states also accept a number of Palestinians. 
Irregardless of the political viability or desirability of such assumptions, it is immediately evident that even were final status arrangements on the refugee issue to be successfully concluded, the number of Palestinians remaining in the diaspora would remain substantial.  This in turn raises important questions about their civil status. As suggested earlier, a Palestinian state would presumably have the option of extending citizenship to them (although this might be constrained by the dual citizenship policies of the host country). The most sensitivity would undoubtedly arsie in Lebanon. This has led Nawaf Salam to suggest that a form of permanent residency could be granted to Palestinians remaining in Lebanon, granting them full civil and economic rights but not the political rights (voting, office-holding) of Lebanese citizenship.  Others have been critical of such a suggestion, raising the concern that this might create a permanent political underclass, generating the same sorts of dilemmas as those posed by long-term "guest workers" in parts of Europe.
During the intensive permanent status negotiations that took place from the summer of 2000 until January 2001, some progress was made between Palestinian and Israeli negotiators in identifying a common middle ground. On the Israeli side, there appeared to be recognition that Israel would have to be accept some refugee return, admit some responsibility or regret for the refugee issue, and accept primary responsibility for financing refugee compensation. On the Palestinian side, there was recognition that Israel would not permit practical implementation of the right of return to fundamentally change the demographic face of the Jewish state. As a consequence, voluntary refugee repatriation (to a Palestinian state) and resettlement (in either present host countries or, to a much lesser extent, other countries) would also be important elements of an eventual agreement.  However, these understandings were rendered moot--temporarily, perhaps--by the election of Ariel Sharon as Israeli prime minister in February 2001. More generally, the upsurge in violence that began in the fall of 2000 hardened public opinion on both sides. Within Israel, protests by Palestinian citizens of Israel as to their second-class treatment led many Israeli Jews to fear any future return of even token numbers of 1948 refugees, while the second intidafa severely weakened support the Oslo peace process overall. Among Palestinians, popular support for the right of return remained strong, and the violence and increasing harshness of Israeli occupation disinclined many away from considering compromise.
 Rashid Khalidi, Toward a Solution, in Center for Policy Analysis on Palestine, Palestinian Refugees: Their Problem and Future (Washington, DC: CPAP, 1994).
 Salim Tamari, Palestinian Refugee Negotiations: From Madrid to Oslo II (Washington, DC: Institute for Palestine Studies, 1996). Draft version archived on PRRN.
  Commentary, Shaml Newsletter 3 (June 1996), p. 4.
 Ariel Sharon, "Arab Peace Ambush," Likud USA
 Gold in Yediot Ahronot, 4 June 1996. Archived on PRRN.
 Archived on Israel Information Service.
 Mark Heller, A Palestinian State: The Implications for Israel (Cambridge MA: Harvard University Press, 1983), pp. 80-87; Mark Heller and Sari Nusseibeh, No Trumpets, No Drums: A Two-State Settlement of the Israeli-Palestinian Conflict (New York: Hill and Wang, 1991), pp. 86-96.
 Shlomo Gazit, The Palestinian Refugee Problem, Final Status Issues Study No. 2 (Tel Aviv: Jaffee Center for Strategic Studies, 1995), p. 26.
 Shimon Peres (with Arye Naor), The New Middle East (New York: Henry Holt, 1993), pp. 192.
 Khalidi, "Toward a Solution," p. 24.
 Rex Brynen, "The Funding of Palestinian Refugee Compensation," presented to the ISEPME refugee group, Harvard University, February 1996, and archived on PRRN.
 Hilal Khashan, Palestinian Resettlement in Lebanon: Behind the Debate (MontrŽal: ICAS Montréal Studies on the Contemporary Arab World, April 1994), p. 10.
 Donna Arzt, Refugees into Citizens: Palestinians and the End of the Arab-Israeli Conflict (New York: Council on Foreign Relations Press, 1996).
 Heller, A Palestinian State estimates the number at around 800,000 (p. 83); the PL0's own Programme for the Development of the Palestinian National Economy for the Years 1994-2000 (Tunis, July 1993) suggests a number of 500,000 returnees (displaced persons, rather than 1948 refugees) over five years.
 Nawaf Salam, "Between Repatriation and Resettlement: Palestinian Refugees in Lebanon," Journal of Palestine Studies 93 (Autumn 1994).
 Eldar, Akiva. "How
to solve the Palestinian refugee problem". Ha'aretz Tuesday,
May 29, 2001; and "Sir,
if you please, tear down your house" (Ha'aretz, Thursday, May 31,
Rex Brynen * firstname.lastname@example.org * 5 June 2001