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Actually the deal proposed by Saudi Arabia didn't include right of return to Israeli territory but full peace deal and normalisation of relations with the entire Arab and Islamic world if it returns to pre 1967 borders. Settlements in occupied territories would have to go. But Israel won't give up the West Bank so it's unlikely to happen.

On another note isn't Israel meant to be a secular democracy which means it's existence as a Jewish state is quite contrary to those ideals.