Baqa al-Gharbiyya, Israel – This sleepy agricultural village, an hour’s drive northeast from Tel Aviv, feels worlds apart from Israel’s commercial capital. Garbage lines many of the narrow, rutted streets, symptoms of the lower level of government funding bestowed upon the town; unemployed men mill about, complaining that Israel’s policies have hurt the local economy.

Avigdor Lieberman, Israel’s hard-right foreign minister, has proposed annexing this and other Arab villages to a future Palestinian state. Their inhabitants would be stripped of their Israeli citizenship unless they were willing to leave their land and swear a “loyalty oath” to the state.

His plan is deeply unpopular here and in nearby villages. Despite the discrimination most Arabs experience in Israel, they say few will renounce their Israeli citizenship to become Palestinians.

"I’m here in this state now," said Jamil, the owner of a small bakery near one of the town's green-domed mosques. "My family has been here since before 1948. I don’t want to go out to Palestine. I don’t like the wars, I have problems with the [Israeli] government, but a Palestinian state? No."

Liberal Israeli commentators have denounced Lieberman’s plan as racist, but centrist and left-wing Israeli politicians have been more muted in their criticism, leading many Israeli Arabs to believe that their country’s political leadership tacitly supports Lieberman’s plan.

"He’s shouting what they are not saying," said Ihad Abu Mokh, a lifelong Baqa al-Gharbiyya resident, over coffee in a busy café earlier this month. "They dream it. But they know this is the 21st century. We are not in the Dark Ages now."

"Divided. All Palestinian. All Israeli."

But The Palestine Papers reveal that Tzipi Livni, Israel's former foreign minister, did say it: During several 2008 meetings with Palestinian negotiators, Livni proposed annexing Arab villages to the future Palestinian state, forcing tens of thousands of Israeli Arabs to choose between their citizenship and their land.

Her clearest language came on June 21, 2008 , when she told senior Palestinian negotiators Ahmed Qurei and Saeb Erekat that their land swaps should include Israeli Arab villages. Udi Dekel, a top adviser to the then-Israeli prime minister Ehud Olmert, rattled off a list of villages that would be annexed to Palestine.

Livni: We have this problem with Raja [Ghajar] in Lebanon. Terje Larsen put the blue line to cut the village in two. [This needs to be addressed.] We decided not to cut the village. It was a mistake. The problem now, those living on Lebanese soil are Israeli citizens. Dekel: Barka, Barta il Sharqiya, Barta il [Garbiya], Betil, Beit Safafa… Qurei: This will be difficult. All Arabs in Israel will be against us. Becker: We will need to address it somehow. Divided. All Palestinian. All Israeli.

Two months earlier, in another meeting with Qurei and Erekat , Livni herself mentioned the same villages, describing them – their status in the state of Israel – as a problem in need of resolution.

Livni: Let us be fair. You referred to 1967 line. We have not talked about Jerusalem yet. There are some Palestinian villages that are located on both sides of the 1967 line about which we need to have an answer, such as Beit Safafa, Barta’a, Baqa al-Sharqiyeh and Baqa al-Gharbiyyeh.

Livni’s choice of words is striking. Beit Safafa, Barta’a and Baqa al-Gharbiyya all sit at least partly on the Israeli side of the Green Line; their inhabitants carry Israeli passports, pay taxes to the Israeli government, and overwhelmingly self-identify as Israelis.

But Livni describes them as Palestinians – and suggests that they do not belong in the state of Israel.

"I was born in Israel. I’m not leaving."

Baqa al-Gharbiyya used to be just Baqa, a name still used by many residents. The creation of the state of Israel split the village in half, with Baqa al-Gharbiyya on the west side of the 1948 armistice line and Baqa al-Sharqiyya on the east.

“No question of carrying out a transfer” Livni has described the Palestinian state as a solution to the “national aspirations” of the Palestinian people, and she uses that term to include Israeli Arabs. This was her language from a November 2007 meeting with the French foreign minister: “The idea of creating a Palestinian state is to give a national answer to the Palestinians, wherever they are. Those who live in the territories, in the West Bank and the Gaza Strip, those who live outside of the territories, whether they live in different refugee camps or in Israel – it’s the national answer to them.” She was criticized for her comments; Israel’s popular Nana10 Web portal ran an opinion piece comparing her to Avigdor Lieberman. But she used similar language a year later, when she described a Palestinian state as “a national solution” for Israeli Arabs. Livni quickly tried to clarify her comments, telling Israeli radio in December 2008 that “there is no question of carrying out a transfer of forcing them to leave.”

Residents regularly travelled back and forth between the two until six years ago, when the Israeli separation barrier was built. Several streets in the villages now dead-end at an eight-metre-high concrete wall topped with barbed wire.

Those who live in Baqa al-Gharbiyya face what they, and many Israeli and international human rights groups, describe as systemic prejudice. Israeli Arabs routinely face discrimination when applying for jobs, and their towns and villages often receive a lower level of government funding than Jewish communities.

In its 2009 report, the Association for Civil Rights in Israel described the discrimination faced by Arabs as "open and explicit", and warned that the government is threatening "their most basic rights – to equality, education and employment – as well as their very citizenship".

"Look around this village, you see the streets, the cars, the buildings, how it looks,” said Mustafa Fayoum, a resident of the Arab village of Jaljulia. “Compare it to Tel Aviv. You will see the difference.”

Yet Qurei was right when he said that Arabs in Israel would oppose a transfer to Palestine: In dozens of interviews on a visit earlier this month, only one Baqa al-Gharbiyya resident said he would prefer to live in a Palestinian state.

Asked why, many cited economic reasons; even the jobless thought their future prospects were better in Israel.

"Our circumstances here are better than there, even though here we don’t feel that we are in the community, or in the society of the Jewish people," said Bashar al-Alimi, an unemployed 38-year-old.

"It’s a difficult question," said Mounir Abu Hussain, a 34-year-old mechanic. "But my job is here, the work is good here, and maybe it would be hard to go into a Palestinian state."

"[Israel] is a Western country, it’s more developed, there are more options, less corruption," said Ismail Athmani, 34. "And I was born in Israel. I’m not leaving."

But the economy wasn’t the only reason why Baqa al-Gharbiyya residents said they prefer Israel to Palestine. Several described the West Bank as a police state, and said that – despite the discrimination they face – they prefer the level of political freedom in Israel.

"It’s bad in the West Bank. We have family there, we hear things. The police in Palestine, you can’t talk about politics unless you’re in the most closed-off place. Otherwise you die," Athmani said.

His friend Abu Mokh leaned across the table to interrupt him. "Not die," he said with a rueful grin. "You just disappear."

A widespread view

Polls of Israeli Arabs over the last decade have consistently reached a similar finding: most would rather remain in Israel than live under Palestinian jurisdiction.

A December 2010 survey by the Brookings Institution found that 58 per cent of Israeli Arabs oppose the sorts of swaps proposed by Lieberman and Livni. The Jewish-Arab Relations Index, an annual publication from the University of Haifa, consistently finds majority support for that view (57 per cent in the most recent survey, in 2008). Similarly, a 2000 poll of Umm al-Fahm residents found that 83 per cent want their city to remain Israeli.

Many families in these villages have lived in Israel since before 1948 – before there was a state of Israel, in other words. One man described himself as "more Israeli than Lieberman," referring to the Soviet Union-born foreign minister who immigrated to Israel at the age of 20.

"Netanyahu cannot take me and tell me, ‘you are living here,’" Fayoum said. "I am Israeli, only Israeli."