Prime Minister Ehud Olmert is planning to meet with senior leaders in Saudi Arabia on the possibility of moderate Arab nations forming a bloc that would negotiate with Israel on a plan to resolve the Israel-Palestinian conflict, the UK's Sunday Times reported. In September, reports circulated of a secret meeting between Olmert and former Saudi ambassador to Washington Prince Bandar bin Sultan, one of King Abdullah's senior advisors. Both Israel and Saudi Arabia denied that any such meeting had taken place, with Olmert characterizing the reports as 'speculation, imagination, things that are beyond the limits.' Olmert may be considering a regional peace plan based on the 2002 Saudi initiative, which would establish a separate Palestinian state, and formalize peaceful relations between Saudi Arabia, Bahrain, Qatar, Oman, the Emirates, Morocco and Tunisia. The Arab League has endorsed the plan. The Times quoted an unnamed Israel official, who said that the planned meeting with the Saudis was not, in fact, Olmert's initiative, but rather "a dictate given to him last month when he met [US President] George W. Bush and Condoleezza Rice in Washington." While Rice did not confirm or deny that Washington had pressed for the meeting, she hailed it as an indication that "a regional peace dialogue may be resumed." Sources in Jerusalem have said recently that the Saudis were currently playing a constructive role in negotiating the Israeli-Palestinian conflict. Regarding the Palestinians, government sources said there had been a dramatic shift in Saudi policy since the height of the Palestinian violence in 2002 and 2003, when the Saudis reportedly provided Hamas with some 70 percent of the organization's budget and sent thousands of dollars to the families of suicide bombers. Now, according to these sources, the Saudis are placing the 'weight of the kingdom on the side of the moderates inside the Palestinian Authority.' Given this, Gaza could quickly turn into a place where Saudi Arabia and Iran vie - through the use of their considerable wealth - for the support of the population, with the Iranians supporting Hamas and Saudi Arabia backing Palestinian Authority Chairman Mahmoud Abbas. Herb Keinon contributed to this report.