They said Zebari stormed out after he told his Arab peers that his government was angry over public comments by Qaddafi pledging support to a group of Saddam loyalists he met in Libya earlier this week. The group included senior commanders of Iraq’s Saddam-era army and officials from his outlawed Baath Party.

On Wednesday, Iraqi government spokesman Ali Al-Dabbagh condemned Qaddafi’s Sunday meeting with the 29 Saddam loyalists, describing the move as “undiplomatic” and an “insult” to the people of Iraq.

Zebari later rejoined the meeting following a mediation by the foreign ministers of Bahrain and Kuwait, according to the delegates. The meeting that Zebari walked out was trying to hammer out an agenda for the Arab summit scheduled for Saturday and which is expected to be dominated by the stalled Middle East peace process.

In an opening statement, Libyan Foreign Minister Moussa Kosa blamed the deadlock on Israel’s “obstinacy” and the “bias” by the West against Arabs.

The Palestinians are seeking a strong Arab stance in the face of Israel’s plans to expand Jewish housing in East Jerusalem. They also want millions of dollars in funding for Palestinians living in that section of the city. The foreign ministers on Thursday agreed to raise $500 million for Jerusalem Palestinians, Arab League chief Amr Moussa said.

“Yes, they have agreed,” Moussa told reporters when asked if the fund had been approved by the ministers.

The Palestinian Authority had put in a request for $500 million in Arab aid to help Jerusalem Palestinians cope as they are being squeezed out by Israel’s settlement drive. The summit’s agenda also deals with other Middle East issues such as the West’s standoff with Iran over its nuclear program, the situation in Iraq and Sudan.

The summit is likely to register a higher-than-usual no-shows by Arab leaders. Egyptian President Hosni Mubarak, recuperating from a gall bladder operation in Germany, will not go and is sending his prime minister in his place. Lebanon’s top leaders will not attend the summit. Instead of sending the president or prime minister, Lebanon will be represented by its ambassador to Cairo at the summit.