Palestinians reject Australia's 'face saving' alternatives to Jerusalem embassy move

The remarks made by Palestine's ambassador to Australia, Izzat Abdulhadi, come ahead of a cabinet meeting on Tuesday to discuss the location of Australia's embassy in Israel.

"I don't think Palestinians should pay the price for some kind of face-saving move for [Prime Minister] Scott Morrison," Abdulhadi said in a statement quoted by the Sydney Morning Herald.

He added that a compromise of a smaller west Jerusalem consulate would still "legitimise the illegal occupation of Jerusalem".

Canberra is reportedly considering retaining its Tel Aviv embassy and opening a smaller consulate in west Jerusalem. The option is declaring Australia's recognition of west Jerusalem as Israel's capital while deferring the embassy move to a later date, according to Australian media reports.

Another option on the table is that Scott Morrison's government could attempt to mitigate the backlash from an embassy move by making token gestures towards the Palestinians, including by increasing its diplomatic presence in Ramallah.

Abdulhadi, however, rejected all options and said "the only gesture is the recognition of Palestinian statehood".

Prime Minister Scott Morrison had earlier this year signalled that Australia would follow in the steps of the US by recognising Jerusalem as Israel's capital.

Morrison's plan, however, was derailed after a political backlash from Muslim-majority southeast Asian states Malaysia and Indonesia.

Indonesia exerted economic pressure on Canberra by stalling a key free trade agreement that was due to be signed by the end of 2018.

"It (the Free Trade Agreement) can be signed anytime, but when you will sign it... depends on Australia's position" on the embassy issue, Indonesian Trade Minister Enggartiasto Lukito told reporters in November.