1. Contrary to what was generally expected here, proposals submitted by Bernadotte to Tel Aviv and Cairo go much further than preliminary approaches to attempted eventual settlement. I understand suggestions comprise the whole outline of a settlement on the following basis.
(a) Recognition of Israel Sovereignty.
(b) Arab state to comprise Arab area of Palestine plus Transjordan.
(c) Jerusalem to be included in Arab State.
(d) Some form of special regime for Haifa making it a free port.
(e) Arrangements for economic union between Arab State and Israel together with provision for concerting defence and foreign policy.
(f) Some territorial rearrangement in the Negeb in favour of Arabs and in Galilee in favour of the Jews.
2. American quarters here seem somewhat surprised, especially with the idea of scrapping United Nations regime for Jerusalem and handing over to Abdullah. Israel representatives are as yet without word of Tel Aviv reaction but say they cannot imagine how proposal to install Abdullah in Jerusalem could be acceptable, nor do they like in any way the suggestion of common defence and foreign policy with Arab State.
3. So far as I can discover, Bernadotte has given himself a free hand in putting proposals forward and they are not to be taken as emanating from Lake Success. He has asked the parties not to reject the suggestions out of hand but to send representatives to Rhodes to discuss with him on basis of proposals.