By Heather Sharp BBC News Online

About 300,000 Palestinians fled the 1967 war

US President George W Bush's comments on Israeli Prime Minister Ariel Sharon's Gaza withdrawal plan included tough words on one of the thorniest issues in the Middle East conflict - Palestinian refugees.

The fate of the estimated four million Palestinians living in refugee communities scattered around the Middle East is highly controversial.

Hundreds of thousands of Palestinians fled or were displaced from their homes during the Israeli-Arab wars in 1948 and 1967.

They and their descendents live, many crammed into overcrowded enclaves, mainly in the West Bank, Gaza Strip, Jordan, Syria and Lebanon.

The Palestinians have long asserted that the refugees have a moral and legal right to return to what was once Palestine - including land which is now Israel.

Refugees wishing to return to their homes and live at peace with their neighbours should be permitted to do so at the earliest practical date UNGA resolution 194

Some of the refugees still retain old deeds and keys to homes now occupied by Israelis.

But for Israel, granting the right of return would be tantamount to surrendering the country's identity.

With a population of 6.6m, of which 5.4m are Jewish, opening the door to a potential 4 million returnees would threaten the demographic balance - and thus the very nature - of the world's only Jewish state.

Legal debate

In his statement, Mr Bush said that once a Palestinian state is created it should provide space for the Palestinian returnees:

"A solution to the Palestinian refugee issue as part of any final status agreement will need to be found through the establishment of a Palestinian state and the settling of Palestinian refugees there, rather than in Israel," he said.

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But to many Palestinians, the right to return is an inalienable basic human right to each individual refugee, and is therefore not for Palestinian negotiators - or anyone else - to bargain with.

The Palestinians base their claim to the right to return on United Nations General Assembly (UNGA) resolution 194, which was passed in 1948.

It states that Palestinian "refugees wishing to return to their homes and live at peace with their neighbours should be permitted to do so at the earliest practical date".

Further UNGA resolutions have since been passed, and arguments are also drawn from the Universal Declaration of Human Rights.

Opponents point out, however, that UNGA resolutions are not binding in the way that UN Security Resolutions are.

They also question whether the language used in resolution 194 amounts to a "right" to return, and raise their own human rights fears that returnees would be hostile to Israel.

Arafat says Palestinians will never give up the right of return

There is also debate over the number of refugees who initially left in 1948, and whether it was Arabs or Jews who caused them to go.

In 1951, Unrwa, the UN agency established to care for the welfare of the Palestinian refugees, established a list of 860,000 people who were considered to have lost homes and livelihoods in Palestine.

After the outbreak of the 1967 Arab-Israeli war, another wave of Palestinians were displaced.

As Israel expanded its territory, an estimated 300,000 Palestinians left the West Bank and Gaza, most of them to settle in Jordan.

Final status issue

The Israelis have long called for the refugees to be absorbed into their Arab host countries, arguing that that is what Israel did with large numbers of Sephardic Jews expelled from Arab lands after 1948.

But most the Arab nations have refused, wishing neither to capitulate to Israeli demands nor to upset the demographic balances of their own populations.

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Jordan has granted temporary national passports to Palestinians, but in Lebanon they are denied access to education and health services, while they are subject to strict political control in Syria.

The intractable problem has been considered a "final status" question in Israeli-Palestinian peace talks, left until last along with other thorny issues such as the status of Jerusalem.

There was talk of a "broken taboo" when it was discussed at the Camp David talks between Yasser Arafat and then Israeli Prime Minister Ehud Barak in 2000.

Although the talks collapsed, Mr Barak for the first time allowed a small number of Palestinians back into Israel for "family reunifications".

Pragmatic proposals

While the Palestinian Authority and Palestinian militant groups maintain that the right of return is non-negotiable, some prominent Palestinians have taken a more pragmatic attitude in recent years.

In 2002, Sari Nusseibeh, an academic and former representative of the PLO in Jerusalem controversially proposed a settlement where Palestinian refugees would only be able to return to a Palestinian state.

Also, the unofficial "Geneva Accord" peace framework, proposed by former Israeli minister Yossi Beilin and former Palestinian Information Minister Yasser Abed Rabbo in 2003, relinquished the full right of return.

It would have allowed Israel to determine the number of Palestinians who would be allowed back into Israel as part of a deal securing the creation of a Palestinian state.

Palestinian leader Yasser Arafat has declared in response to Mr Bush's statement that Palestinians will never give up the right of refugees to return to their homeland.

He has also previously said that the right of return should be implemented in a way which takes into account Israeli demographic concerns.

How this could ever be possible - and how many refugees would actually return to Israel given the chance - remains far from clear.

PALESTINIAN REFUGEE POPULATIONS 1. Jordan: 1,718,767 2. Lebanon: 391,679 3. Syria: 409,662 4. West Bank: 654,971 5. Gaza: 907,221