General Dayan expanded on the refugee question, saying that unless it were solved, no real settlement of the conflict was possible. One could see in Lebanon and in Jordan, and to some degree in Kuwait, the nature of the problem. The question is where the refugees will settle permanently. There is no other solution than for them to settle in their respective countries. Some may claim compensation. Even a Palestinian state in the West Bank cannot absorb the one half million refugees now in Jordan. None of the refugees come from Nablus, and they are not wanted there. Dayan once tried to convince the Gazans to move to the West Bank, and offered to build them accommodations, but they would not move and they would not have been welcomed. Israel wants to solve the problem and to provide the refugees with a normal status. They should move out of the camps, should get work, and should obtain citizenship. Israel can deal with the 190 thousand refugees in Gaza. Israel can give them accommodations, and can end the camps. Whoever wants to claim Israeli citizenship can do so. They will not be pressured and citizenship will not be imposed on them, but this is Israel’s obligation to give them the option.
August 10, 1977
And did he say anything about the Arabs who weren't refugees?
Yes, on page 448:
General Dayan repeated that Israel rejected any contact with the PLO, but stated that Israel does want to talk to the Palestinian Arabs in the administered territories about how to develop a modus vivendi. In Gaza, one half of the population consists of refugees. They work in Israel and he sees no solution other than their being combined with Israel. They should have work and they should have places to live. In Jerusalem and in the surrounding areas, the people are also tied to Israel...Israel wants to live together with the West Bank and Gaza. This is a very general idea and Dayan had no practical proposals to make. But he emphasized again that he wanted to discuss how Arabs and Israelis could live together.
Menachem Begin participated in the meeting with then-Secreatary of State Vance and
Prime Minister Begin added to General Dayan’s remarks by saying that he would propose that the Arabs in Judea, Samaria, and Gaza should have full cultural autonomy. Israel would not interfere in their lives. They would have schools based on their own heritage. They should have the free option of citizenship in Israel. Now in Judea and Samaria the Arabs are citizens of Jordan. Israel will not force its own citizenship on them, since that would be wrong. But Israel is prepared to give them options. If they ask for Israeli citizenship, Israel will grant it. They will be entitled to vote in Knesset and will have full equality. There are now in Israel 100,000 Jews [Arabs?], who are permanent residents, but who are not citizens. They enjoy all rights except voting. If they become citizens, then they vote; if they are resident non-citizens, they have all rights, but they do not vote. There should be complete equality of rights for Arab and Jewish residents, and Arab and Jewish citizens. Israel has proved that Arabs and Jews can live together. Israel will not interfere in their lives.