After a tense waiting period, Israeli politics has received news with staggering implications. Avigdor Lieberman has been cleared of all charges by the Court of Law in Jerusalem, and is about to return to the Foreign Ministry. Lieberman's entire public career since 1999 was run under the shadow of criminal investigations on corruption charges. Nevertheless Lieberman became one of the most powerful figures in Israeli politics, and is Netanyahu's only serious competitor for the leadership of Israel's political right. No longer hampered by legal threats, Lieberman is now freer than ever to challenge Netanyahu.
In the last years, particularly since he was appointed foreign minister, Lieberman has positioned himself as representing Israel's "real", "tough" right. One of the most famous examples was his speech at the UN General Assembly where he publicly contradicted Netanyahu's official position that Israel was striving towards an agreement with the Palestinians within a short time. Lieberman said flatly that such an agreement was unlikely to be reached for decades.
Lieberman's political career has been built on his overt distrust of Arabs. He has always claimed that the Arab World in general and Palestinians in particular are not capable for peace, only understand the language of power, and should not be trusted. Quite unfortunately the recent developments the Arab World provide him with the opportunity to say, "I told you so." The instability in major Arab countries and the horror of the Syrian civil war are strengthening his position that it is utterly useless to seek peace agreements when you cannot even know who will be ruling major countries in the Middle East.
Now that Lieberman has been acquitted, his popularity is likely to surge, and this will put enormous pressure on Netanyahu. Lieberman is free to resume his bid to become the leader of Israel's right and possibly even challenge Netanyahu for the Likud's leadership. He is also likely to cooperate more closely with Naftali Bennett to undermine the current peace talks with the Palestinians, which are in permanent crisis anyway.
Sources close to Netanyahu who spoke on condition of anonymity told me that Netanyahu was moving closer to genuinely seeking peace with the Palestinians. Even if this is true, we are unlikely to see any expressions of such will to peace. Netanyahu's major concern is now to maintain his position uncontested leader Israel's right, or in the right's parlance, of Israel's national camp. He will do whatever he can to prove that his right-wing credentials are impeccable, and this means that the peace process's already very slim chances for success are now virtually nil.
Netanyahu is bound to take ever-stronger hardline positions on all major issues, particularly vis-à-vis the Palestinians. We are likely to see a hardening of positions in the peace talks sponsored by John Kerry. Netanyahu's strategy will be to avoid open conflict with the U.S. administration while not making any meaningful concessions. He will not end these peace-talks actively, but he will either force the Palestinians to leave them, for example by further stepping up settlement-construction, or simply drag them on to reach the nine-month deadline Kerry set.
Lieberman's acquittal is also bound to further embolden Israel's far right, which has recently stepped up activity on the Temple Mount and is challenging the status that prevents Jews from praying there. This creates a highly volatile situation with potentially explosive consequences -- after all, the second intifada was ignited by Ariel Sharon's visit on the Temple Mount. This is bound to create a problematic situation for the two centrist parties in Netanyahu's coalition, first and foremost for Tsippi Livni and her Hatnu'a party. Her platform was almost exclusively defined by striving towards a peace agreement with the Palestinians. If the moment comes in which it will be obvious that the Netanyahu government has no intention of reaching such an agreement, the question is how long Livni can continue participating in this government without losing credibility.
Yair Lapid's Yesh Atid party is under less pressure in this respect: while its political platform includes actively striving for the two-state solution, negotiations with the Palestinians are not central to this party's public commitment to social justice and raising Israel's living standard. As long as Yesh Atid will be able to show some results on its social agendas, the party's legitimacy will not be cast into doubt by lack of progress with the Palestinians, particularly since a large part of its electorate comes from the center-right. Furthermore Yesh Atid and Lieberman share a secularist agenda, for example on the civil union bill, and could cooperate on these issues.
To conclude: The main consequence of Lieberman's acquittal is is that Netanyahu's current government is bound to become more similar to his previous one: committed to a strongly right-wing agenda, but with the legitimacy of centrist coalition partners. This pushes the already faint hopes for peace far beyond the visible horizon.