By Luke Baker
JERUSALEM, March 18 (Reuters) - As the dust settles on a dramatic election, the immediate questions are how Prime Minister Benjamin Netanyahu managed to stage such a fierce comeback, why the opposition fell short and what it means for Israel, the Palestinians and the world.
Four days before the vote, Netanyahu looked all but out for the count, with the last opinion polls giving the center-left Zionist Union a four-seat lead - enough not only to win but potentially to form a governing coalition.
Even Netanyahu, a veteran campaigner who has emerged victorious from three elections in the past, seemed to think his days were numbered, saying there was a "real danger" he would lose and calling on his right-wing base to turn out.
But in the final three days of campaigning - and on the day of the vote itself - "Bibi" went on a tear, giving more interviews than he has given in years and making a series of right-wing pledges designed to attract nationalist voters.
Visiting the Har Homa settlement in the West Bank, a development he authorized when he was first prime minister in 1997, he promised to go on building Jewish homes on occupied land the Palestinians want for a state, and acknowledged the settlement was designed to cut Palestinians off from Jerusalem.
In an interview the same day he promised that if he were re-elected he would not allow the establishment of a Palestinian state, a statement that flew in the face of his own past commitments and decades of international efforts to find a two-state solution to the conflict.
At every opportunity he said his Likud party risked losing and sowed fears about what it would mean for Israelis' security and the spread of militant Islam if the center-left were allowed to secure victory.
And on Tuesday - as the vote was underway - he railed against what he called "left-wing organizations" that he said were busing Arab-Israelis to the polls in an effort to bolster the center-left and oust him from office.
While to many Israelis his comments sounded like the rantings of someone facing defeat after six straight years in power, they were carefully calibrated to prod the right- and far-right vote and close the gap with the center-left.
"Seats changed hands within the right and center-left blocs but otherwise not much really changed," said Gideon Rahat, a professor of political science at Hebrew University.
In effect, Netanyahu succeeded in robbing votes from his allies on the right - Naftali Bennett's pro-settler Jewish Home party and Avigdor Lieberman's ultra-nationalist Yisrael Beitenu - to ensure that Likud ended up with the largest total.
Bennett's and Lieberman's support fell but they still won eight and six seats respectively, a tally that Netanyahu will be able to draw on as he tries to build a coalition.
And by not eating in to the center vote, Netanyahu ensured that Moshe Kahlon, the leader of the Kulanu party, a breakaway from Likud, emerged as the election's "kingmaker," someone "Bibi" will now try to entice back into the fold.
When it comes to the Zionist Union, it appears on the face of it that leader Isaac Herzog did most things right. His economic- and socially-focused campaign won traction with voters and his final tally of 24 seats was both in line with opinion poll predictions and up from the last election in 2013.
But he had nothing extra to draw supporters away from Likud and the security fears Netanyahu hammered on about may have left undecided centrists plumping for what they knew rather than someone new on the day.
Around 15 percent of Israeli voters were reckoned to be undecided going into the election, making the wide swing in the final tallies more understandable, even if it also suggests Israel's polling methods leave room for improvement.
Surveys showed that the dominant issue for most Israelis in the election was the cost of living and housing. The centrist and left parties that campaigned on that platform saw an overall increase in their support, winning around 50 seats this time, up from around 45 at the last election.
But the bulk of Israeli voters still skew to the right - whether nationalists, settlers or the ultra-Orthodox - and for them issues of security, support for settlements and protection of their interests eclipse standalone economic concerns.
"The politics of identity in Israel is very strong," said Rahat, explaining that religious or nationalist affiliation dominates in Israel rather than socio-economic class. "Support for Likud was based on identity, fear of change and the notion that overall Netanyahu is the only experienced person."
PALESTINIANS AND IRAN
While the election results may come down to the shuffling of allegiances within major blocs, the repercussions are large.
Netanyahu's pledge of no Palestinian state while he is in charge puts him on a collision course with the United States and the European Union at a time when both are desperate to breathe new life into the moribund peace process.
His commitment to settlement building will also add fuel to the fire, strengthening Palestinians' belief that Israel is engaged in a land grab and hardening their determination to seek redress via the International Criminal Court.
Palestine formally becomes a member of the court from April 1 and plans to file war crimes charges against Israel over its 48-year occupation of the West Bank and East Jerusalem, as well as deaths stemming from last year's war in Gaza.
In retaliation ahead of the ICC move, Israel has suspended the transfer of around $120 million a month in tax revenues it collects on the Palestinians' behalf, crippling the Palestinian budget and prompting deep cuts to state employees.
The threat of a return to conflict between Israel and Hamas in Gaza is never far from Israeli or Palestinian minds, and violence aimed at Jewish settlers in the West Bank is likely to intensify if Netanyahu follows through on his commitments.
And hanging over the region is the question of what Israel does next on Iran. Netanyahu has made clear that he is determined to scupper the deal emerging between Tehran and the Obama administration on Iran's nuclear program.
Israel's earlier rhetoric about "going it alone" against Iran if it has to - a hint at possible bombing raids - has died down, but the tension between Netanyahu and Obama has not dissipated and if anything "Bibi" will now be feeling more energized to take Obama on in the last months of his presidency. (Editing by Anna Willard)