US President George W. Bush is "very conscious" that Jewish refugees fled to Israel from Arab lands after the 1947-49 war, and this came up in his discussions on the Palestinian refugee issue last week in Jerusalem, a senior Western diplomatic source said Tuesday. Jewish organizations have been trying for years to underline the similarities between the plight of Jewish and Arab refugees, and this was a clear indication that the narrative has begun to seep into US administration thinking. According to the official, "One of the points that came up in this [Bush's] discussion was the number of Jewish refugees that were created in this period after 1948. The president is very conscious that the Jewish refugees came to the Jewish state, and I think that's a parallel situation." The official said, "A lot of the people now in Israel were refugees, they were one way or another made to feel unwelcome in the countries around the region. A lot of them lost property, and in some cases - in Iraq for example - they very narrowly escaped." The official made an analogy that just as Jewish refugees were absorbed in the Jewish state, the Palestinian refugees should be absorbed in a future Palestinian state. Both Prime Minister Ehud Olmert and Foreign Minister Tzipi Livni have recently been highlighting in private conversations with guests from abroad the plight of the Jews who fled Arab countries after the creation of Israel. "It is no coincidence that Bush has become aware of this," one Israeli government official said. The senior Western official said that while Bush made clear while here that he was not coming to impose an American solution, neither on the refugee issue or on any of the other core issues, he was signaling certain things that the US might be prepared to do, "like compensation for refugees." The official said the US might be willing to "go out and organize an international fund" to compensate Palestinian refugees, adding, however, that this wouldn't be done until the sides requested it. Bush infuriated many in the Arab world when he said in a statement last Thursday night summing up his trip to Israel and the Palestinian Authority that a future agreement "must establish Palestine as a homeland for the Palestinian people, just as Israel is a homeland for the Jewish people." In addition, Bush said: "I believe we need to look to the establishment of a Palestinian state and new international mechanisms, including compensation, to resolve the refugee issue." Regarding the settlements, the Western official said Bush made it clear to Olmert that the US expected Israel to comply with the road map, which states that Israel must freeze all settlement activity, including natural growth. The official said Israel would not be deemed to have fulfilled its road map obligations unless it completely stopped all construction in the settlements, including in east Jerusalem. At the same time, the official said, "there is a feeling that once you make progress on defining the borders, some of these issues become less contentious." Proffering a possible explanation as to why Olmert told the Knesset Foreign Affairs and Defense Committee on Monday that the government's failure to remove the illegal settlement outposts was a disgrace, the Western official said he believed "Olmert was embarrassed because his friend [Bush] was here, a steadfast supporter, and he was unable to tell him that Israel had abided by its commitment to the US." Bush had a great deal of respect for Olmert as a "leader" and as a "politician," the official said, adding that at the US leader's dinner on Thursday with Olmert, Kadima's senior ministers and the leaders of its coalition partners, one of the president's messages was that he was willing to invest "considerable capital in this enterprise," but wanted to know the coalition was strong enough to enable Olmert "to negotiate seriously. The official added that Bush's announcement that he would be coming back to Israel again in the spring was an indication that he believed the government would not fall. He said Bush made it clear during that dinner that if the coalition was not strong it would make it difficult for him to make the type of investment required - in terms of political capital and presidential prestige - in the current diplomatic process. The Western official said Bush had explained that the 2008 deadline that was set for the current negotiations only dealt with coming up with an agreement on what a future Palestinian state would look like, and was "not a deadline for the establishment of the state." The establishment of the state, he said, would not take place until the road map was implemented, including creating security in Gaza. Bush "understood that Israel needs security guarantees," the official said, and the president made it clear that "we can make it happen." The official did not spell out what those guarantees were. Regarding Gaza, the official said the US looked favorably on the idea of the PA taking control of the Karni crossing into the northern Strip. This was one way, the official said, of the PA regaining a presence in Gaza.