At the edge of Mahane Yehuda market in Jerusalem, elderly men sit playing backgammon - or shesh besh as it is known locally - wearing looks of intense concentration.

It is a scene which can be found in coffee shops across the Middle East, such as in Egypt, Syria, Yemen and Iraq. In fact many of the men here are Jewish Israelis who originally came from those Arab countries.

"We stayed in Baghdad until 1951, when we moved to Israel," Vardika Shabo says. "They hated the Jews in Iraq. They killed many of us in 1948. They took our belongings and burned our houses."

"We left with nothing except our suitcases. No money. We left the house, my parents' shops. Everything that we had, we left."

Another man, Baruch Cohen, left Qamishli in North-Eastern Syria in 1963. He tells me he was 13 when his father led a group of 97 Jews out of the area. They left secretly to avoid unwanted attention and were helped across the border into Turkey.

From there safe passage to his new home was arranged by the Jewish Agency, a government body which brought Jews from the Diaspora to live in Israel.

"We were persecuted. The regime was very cruel to the Syrian Jews," says Mr Cohen. "We escaped with just the clothes on our backs. It was like the exodus from Egypt in the Bible. We lost our lands and came here as refugees."

According to Israeli government figures, 856,000 Jews fled Arab countries in four years after the state was created in 1948. Officials say they lost billions of dollars' worth of property and assets.

A new government campaign aims to raise awareness of their plight. More controversially it aims to equate it with that of the hundreds of thousands of Palestinian refugees who lost their homes in Israel. It insists that both cases are part of the same core issue that must be addressed by any future peace talks.

"The problem of refugees is probably the most thorny and painful one. Everyone agrees without solving this we won't be able to achieve true peace nor normalisation in the Middle East," says Deputy Foreign Minister Danny Ayalon.

"We have to, ahead of time, understand that refugees are not only on one side of the border but both sides. There are Arab refugees and there are also Jewish refugees and we should use the same yardstick for them all."

Mr Ayalon spoke at the first special conference on the issue at the UN headquarters in New York last week. He suggests that an international fund could be set up to deliver compensation for both sets of individuals.

'I am a Refugee'

Palestinian leaders though are angry at the "I am a Refugee" campaign, which they see as an Israeli attempt to create a new obstacle for any future peace efforts.

"This is not an issue in the negotiations that we agreed on with them - they include Palestinian refugees, Jerusalem, borders, settlements, water and security," says chief Palestinian negotiator Saeb Erekat.

"They continue loading issues to the overloaded wagon of complexities in order not to have a solution."

He suggests Israel's timing is designed to coincide with the latest plans to ask for the UN General Assembly to admit Palestine as a non-member state. This will enable the Palestinian leadership to pursue Israel through the international courts.

"These people are destroying the two-state solution and that is why we are going to the UN in order to preserve it," Mr Erekat says.

The refugee issue has proved so difficult that it was put off by the two sides to be tackled as part of any eventual final status discussions under the Oslo Accords in 1993.

It has been a key Palestinian grievance since 1948. Palestinians argue that their "right to return" is enshrined in UN resolution 194 passed that year, which states that "the refugees wishing to return to their homes and live at peace with their neighbours should be permitted to do so at the earliest practicable date".

Israel says that such a move would obliterate the country's Jewish majority.

Painful memories

While Jews from Arab countries are now naturalised citizens of Israel, many Palestinian refugees remain in camps; most are in the West Bank, Gaza, Jordan, Lebanon and Syria.

At al-Jalazun refugee camp on a rocky hillside near Ramallah in the West Bank, 86-year-old Ahmed Safi lives with his family in a small, overcrowded house. His grandchildren have just arrived home from the local school run by the UN agency for Palestinian refugees, UNRWA.

"We had a huge house in Beit Nabala in Ramla [in present-day Israel]," Mr Safi says. "All the family lived there. Our life was very nice. We had work and a good income, but when we left we couldn't take anything with us because we were scared and we left in a hurry."

His wife, Umm Hazem jangles some large keys, which she sees as symbols of her right to return.

"You see these? I grabbed them from the cupboard and took them with me. I couldn't take anything else as I had my new baby in my arms," she says.

"We want our home back. Even if they came and filled this house with money, it would never compensate. I miss our house in Beit Nabala. The Jews destroyed it but the land is still there, we are still here. We know it's our home, it's our country and there's no place like home."

Analysts warn that the latest moves by Israel, to place the Jewish refugee issue firmly on the agenda, and by the Palestinians to change their UN status are likely to further delay any resumption of peace talks, which stalled nearly two years ago.