Avigdor Lieberman said a peace accord should be based on “population exchanges, not land for peace.” The Palestinians claim the West Bank, Gaza Strip and East Jerusalem for a state.
“It is clear that the 'triangle',” an area where many of Israel's minority Arabs live, “should be outside the borders of Israel, Lieberman told Israel Radio on Sunday.
Ahmad Tibi, an Israeli Arab lawmaker, called Lieberman's proposal “fascist.”
Arabs make up about 20 percent of Israel's citizens, and most sympathize with the Palestinians.
Lieberman’s statement came on a day when Israel vowed to prevent a Libyan aid ship from running the Gaza blockade after it appeared to be heading for the besieged enclave despite a flurry of diplomatic efforts to divert it to Egypt.
"Israel will not let the boat reach Gaza," minister without portfolio Yossi Peled told Israel's public radio a day after the 92-meter freighter Amalthea set sail from the Greek port of Lavrio. Allowing vessels to reach the Gaza Strip without being checked would have "very serious consequences" for Israel's security, he said.
There was confusion over the Libyan aid ship's destination on Sunday. Organizers said it was staying the course for Gaza, despite diplomatic reassurances from Greece that it was headed for the Egyptian port of El-Arish.
"We are heading for Gaza. We will not change direction," Mashallah Zwei, a representative of the Kadhafi Foundation, a Libyan charity, told AFP by satellite phone from on board the Amalthea.
Zwei said the ship was currently "close to Crete" and would likely reach Gaza in about two days. He insisted the foundation was not seeking "a confrontation or a provocation," when asked about the risks of a repeat of an Israeli naval raid on an aid flotilla on May 31 that killed nine Turks.
Israel's Defense Minister Ehud Barak said the attempt to reach Gaza was an "unnecessary provocation." "The goods can be transferred to the Gaza Strip through Ashdod port (southern Israel) after being checked," a statement from his office said.
Barak's office had earlier said the defense minister spoke with Egyptian intelligence chief Omar Suleiman and asked "if Egypt would agree to accept the boat at the port of El-Arish."
It was not immediately clear if Egypt had acceded to Barak's request.
The ship's agent and the Greek Foreign Ministry had on Saturday assured Israel that the Moldova-flagged vessel, chartered by a charity linked to Libyan leader Muammar Qaddafi, was heading for El-Arish.
