The Associated PressCAIRO, Egypt -- Israel would "pay the consequences" if it refused to allow Palestinian leader Yasser Arafat to return from an Arab summit next week, the head of the Arab League warned Thursday in an exclusive interview.

Israel has restricted Arafat's travel for months, but on Tuesday Israeli Prime Minister Ariel Sharon offered to lift the ban so Arafat could attend the Arab summit if there is a cease-fire. But Sharon also indicated Israel might not let Arafat return if there are terror attacks while he is abroad.

"To imprison Arafat, to prevent him from moving or prevent him from returning to his homeland -- they are all acts by a foreign military occupation and they would have to pay the consequences," Arab League Secretary-General Amr Moussa said, refusing to specify what the consequences would be.

Moussa said he did not think the Israelis would keep Arafat from returning, but added that Israeli leaders have made "a lot of grave mistakes in their policies."

On a more positive note, Moussa, the former Egyptian foreign minister, said a Saudi initiative to revive Mideast peace efforts draws on past ideas and might succeed in large part because of the climate of distrust, violence and recrimination in which it was born.

"It comes after the deterioration of the peace process of the '90s. It comes after the climate has become so poisoned. ... It is coming after the war between the forces of occupation and resistance to them. Therefore, it is different," Moussa said.

The initiative, proposed last month by Saudi Crown Prince Abdullah has prompted a flurry of consultations in the Arab world ahead of a March 27-28 summit in Beirut, Lebanon. Arab leaders are to consider adopting the plan as a united position.

The Saudi proposal calls for the Arab world to make peace with Israel if it withdraws from Arab lands captured in the 1967 Mideast War.

As outlined by Abdullah in an interview last month with the New York Times, the proposal requires full Israeli withdrawal from occupied Arab lands -- meaning east Jerusalem, the West Bank, Gaza Strip and Golan Heights. In return Israel and the Arab nations would undertake normal relations.

Abdullah is expected to present that vision to the Arab summit, but whether such simple, straightforward language will survive the meeting is not clear.

There are concerns that "full normalization" -- a term generally meaning exchanges of ambassadors, trade relations and other typical interactions between states -- could be watered down to a more vague guarantee of comprehensive peace.

Moussa downplayed concerns, saying if Israel pulls back to within its pre-1967 borders "then normal relations, as relations with any other country, would be the net result."

The secretary-general of the 22-nation Arab League said the exchange for normal relations will require Israel to agree to the establishment of a "viable Palestinian state."

But Moussa indicated the proposal does not delve into key points of contention -- Palestinian refugees, ensuring Israeli security, the fate of Israeli settlements in the West Bank and the Gaza Strip. Such matters, he said, require Israeli cooperation.

"After this message of peace, we will see what kind of response we are going to get (from Israel)," Moussa said.

Israel has shown interest in the Saudi initiative, though Sharon in the past has rejected any full withdrawal to 1967 prewar borders. Israeli Foreign Minister Shimon Peres has endorsed the proposal as a fresh start.

The Saudi plan also has the support of the Palestinians, the European Union, Egypt, Jordan and, most importantly, hard-line Syria. The United States has welcomed it quietly.

If Arab leaders adopt the initiative next week and Israel accepts it, Moussa said it would "usher in a new era, a new climate that would encourage both sides to move ahead -- and as quickly as we can -- toward the end of this conflict."

Moussa said he believed the Saudi plan was on the table at the Arab summit whether Arafat attended or not, but he cautioned a final decision lay with league members.