AFP - Arab leaders open their annual summit on Saturday determined to send a clear message to Israel that any plan to "Judaise" Jerusalem would spell doom for the Middle East peace process.

The summit is the first to be hosted by Libyan leader Moamer Kadhafi, the longest-serving Arab head of state who considers Israel the "enemy" and has frequently lambasted Arab countries who seek peace with the Jewish state.

It comes amid a spiral of violence that an Israeli general said killed two soldiers and four Palestinians on Friday as Israel's Prime Minister Benjamin Netanyahu vowed to stay the course with his east Jerusalem settlement policy.

Fresh US efforts to broker indirect Israeli-Palestinian peace talks earlier this month were still-born when Israel announced a plan to build 1,600 new homes for Jewish settlers in annexed Arab east Jerusalem.

The announcement, made during a visit to Israel by US Vice President Joe Biden, enraged Washington and infuriated the Palestinians, who just days earlier had agreed to enter US-led "proximity" talks with the Israelis.

Arab League chief Amr Mussa set the tone by insisting that Israel scrap the plans to build the new homes for Jewish settlers in east Jerusalem before indirect talks with the Palestinians can start.

"Indirect Palestinian-Israeli peace talks depend on freezing settlements and especially on cancelling plans by Israel to build 1,600 settlements in (east) Jerusalem," he said.

The summit is expected to adopt a resolution on the terms for a resumption of peace talks, Mussa said.

"We went the extra mile and now the ball is 100 percent in the American and Israeli courts," Hisham Yussef, a senior Arab League official, told AFP on the eve of the summit.Related article:US standing firm in row with Israel

Pro-Western and radical Arab leaders have also been angered by the opening of a restored 17th century synagogue near the Al-Aqsa mosque compound -- home to Islam's third holiest site.

They see such acts as a clear intention by Israel to "Judaise" Jerusalem and undermine chances for a peace agreement with the Palestinians who consider east Jerusalem the capital of their future state.

Jordan's King Abdullah II, who was among the first Arab leaders to arrive in Kadhafi's Mediterranean hometown of Sirte for the summit, warned this week that Israel was "playing with fire" and trying to alter the identity of Jerusalem.

Syrian President Bashar al-Assad ahead of the summit described tensions with Israel as a "state of no-war, no-peace," and said his country stood ready if "war is imposed" by Israel.

Arab leaders are expected to ratify an agreement drafted by their foreign ministers to raise 500 million dollars in aid to improve living conditions for Palestinians in Jerusalem as part of a "rescue" plan for the Holy City.

A senior Palestinian official said the money would go towards improving infrastructure, building hospitals, schools, water wells and providing financial support to those whose houses have been demolished by Israeli authorities.

The leaders are also due to mull a number of strategies, including keeping a record of what they consider to be Israeli "violations" in Jerusalem to refer them to higher bodies such as the International Criminal Court.

Chronic inter-Arab disputes which have billowed at past Arab summits, are expected to be put on the back burner in Sirte as Arab leaders unite to consider their next move against Israel.

Libya, which wants the summit to be one of unity, has also invited UN chief Ban Ki-moon, Italian Prime Minister Silvio Berlusconi and Turkish Prime Minister Recep Tayyip Erdogan to address Saturday's opening session.

Ban arrived Friday and met with Arab officials, including Abbas, to brief them on last week's meeting of the Middle East Quartet -- the United States, European Union, Russia and the United Nations -- which called on Israel to halt settlements.

Kadhafi, who has often ruffled the feathers of his fellow Arab leaders and even traded insults with them, gave his guests a red-carpet welcome as they began arriving on Friday and treated them to a bedouin show of song and dance.

Sudanese President Omar al-Beshir, who is facing an international arrest warrant for alleged war crimes and a crucial electoral test at presidential polls next month, was among those who flew in.