THE BREAKDOWN of US Secretary of State John Kerry’s Israeli-Palestinian peace effort left Israel facing two major strategic issues: deteriorating ties with the American administration and the need to find alternative solutions to the Palestinian problem. Both put serious strains on Prime Minister Benjamin Netanyahu’s already embattled leadership.Insiders describe relations between the Prime Minister’s Office and the White House as poorer than at any time during the past two decades. The Americans adopted a strategy of embracing Netanyahu, trying to address his every concern on the Palestinian track and feel badly let down by his failure to make meaningful peace moves. As a result, Netanyahu and US President Barack Obama are barely on speaking terms and, in Washington, Ambassador Ron Dermer is pointedly being kept at arm’s length.All this is weakening Netanyahu and his coalition. His abortive attempts to torpedo Likud candidate Reuven (Ruvi) Rivlin’s presidential campaign also hurt his standing in the party. Inside the Likud, the word is that Netanyahu has become a liability and that it is time to look for a new leader.In the party and on the Right as a whole, potential candidates are starting to position themselves. At the same time, the center-left, inside and outside the coalition, is coalescing around new plans on the Palestinian track and looking to challenge for power on that basis. If in the last election the Palestinian issue hardly featured, next time it will very likely take center stage.The early June terrorist kidnapping of three yeshiva students in the West Bank and the major IDF operation against Hamas in its wake put the coalition strains on hold.But, despite the traumatic nature of the event, its impact on the political system will likely prove only temporary. The battle lines inside the Likud, in the coalition, and by the opposition have been drawn. Netanyahu can expect challenges from all sides. If he is to survive politically, he may have to find a way to relate to a plethora of new plans for action on the Palestinian track.Anti-Netanyahu sentiment in the Likud is probably stronger than at any point since he first became leader in 1993. Grass-roots party members claim the prime minister doesn’t care about ordinary people; that, under him, the party has lost sight of its social goals; that it has run up huge debts; and that its institutions are virtually paralyzed. Worse, many cannot forgive him for his active behind-the-scenes maneuvering that almost cost the popular, gregarious Rivlin the presidency. “Netanyahu left Ruvi Rivlin, one of the last vestiges of the old ideological Likud, bleeding in the field,” says Central Committee member Gil Shmueli. “It’s a disgrace.”A Rivlin defeat, according to Shmueli, would almost certainly have triggered new elections that could have cost the Likud its hold on power. “Like the Titanic, the party is approaching an iceberg. And instead of steering away from it, Netanyahu is going full tilt towards it,” he tells The Jerusalem Report.In defying Netanyahu over Rivlin’s candidacy, Interior Minister Gideon Sa’ar announced himself as a potential successor.Along with Gilad Erdan, Yuval Steinitz and Ofir Akunis, Sa’ar, 47, was considered one of “Netanyahu’s boys.” Now, he and Erdan have broken away from the boss’s apron strings and Sa’ar, who has a strong party base, could prove a serious leadership contender.ANOTHER CANDIDATE for the party leadership is Defense Minister Moshe Ya’alon, 64. In meetings across the country, party activists have been urging the former IDF chief of staff to throw his hat in the ring. They argue that what the Likud needs is someone with strong security and managerial credentials who can knock the party into shape and also appeal to the public at large.For now, however, it seems that in the public mind it is Sa’ar who is emerging as the heir apparent. A poll for the Knesset TV channel showed 33 percent of Israelis see the interior minister as the most serious threat to Netanyahu, with Ya’alon, at 9 percent, a distant second.Much will depend on what the popular former communications minister Moshe Kahlon does. Kahlon, 53, who left the Likud over differences with Netanyahu, is poised to set up a rival socially-oriented center party that could attract disgruntled Likud activists and possibly even some of its current leaders.“We will soon have new national elections and in the run-up there will be a colossal earthquake,” Shmueli predicts. The heat on Netanyahu’s coalition is coming from his partners on the center-left, Finance Minister Yair Lapid’s Yesh Atid and Justice Minister Tzipi Livni’s Hatnua.If either of the two were to bolt, it probably would be enough to spark new elections – and both are threatening to leave unless Netanyahu moves on the Palestinian track.In early June, after going along with Netanyahu on the Palestinian issue for more than a year, Lapid put down an independent marker. At the prestigious Herzliya Conference on national security, he lambasted right-wing plans to annex parts of the West Bank as “delusional” and warned that “if there is an attempt to annex even one settlement unilaterally, we will not only leave the government, we will bring it down.”Lapid also excoriated Netanyahu for the state of relations with the US, arguing that Israel was losing the “blame game” with the Palestinians because of the prime minister’s failure to put a peace initiative on the table.In calling for action on the Palestinian front, Lapid is clearly seeking to rehabilitate himself as a potential leader of the centerleft, after losing ground through unpopular economic policies and disappointing much of his constituency by going AWOL on the Palestinian issue. He may not yet be ready to topple the government but, given the right political constellation, he might well decide to act on his threat to do so.For now, Livni seems somewhat closer to bolting. The lead negotiator on the Palestinian track, she has been hindered by Netanyahu’s tightfisted approach to the talks and his continued commitment to settlement building in the West Bank. At the Herzliya conference, she gave vent to her frustration, saying she was “tired of being politically correct” and calling the settlements “a security, economic and moral burden designed to prevent an agreement.”This clear signal of readiness to take a strong political line outside the right-tending coalition followed a meeting in London with Palestinian Authority President Mahmoud Abbas, against Netanyahu’s wishes.Livni also has come out against Netanyahu’s tactic of persistently denigrating Abbas, especially in light of the Palestinian leader’s call for release of the abducted Israeli teenagers and his strong words against the kidnappers.Livni hopes Abbas’s public moderation will pave the way for a new round of peace talks under Netanyahu. But she is already weighing other options – including linking up with Labor’s Isaac Herzog and others to create a strong center-left opposition to Netanyahu and the Right. Former leading Laborites in her party, Amir Peretz and Amram Mitzna, are pressing her to make the move – and she has already held preliminary talks with Herzog.HERZOG’S GOAL is to create a centerleft bloc which would include Labor, Yesh Atid, Hatnua, Meretz, and Kadima. In the current Knesset, they hold a total of 48 seats, enough, with the support of the Haredi Shas and United Torah Judaism parties, to force new elections or to form an alternative government supported by 66 of the 120 Knesset members.In a rehearsal for the bigger prize, Herzog, Livni and Shas leader Aryeh Deri worked together to run Hatnua’s Meir Sheetrit for president. Their eleventh-hour collective effort was enough to get Sheetrit through the first round of balloting and into the final run-off against Rivlin. Indeed, Sheetrit almost certainly would have won – much to his backers’ embarrassment given the sexual harassment allegations that surfaced the following day – had not Shas’s former leader Eli Yishai balked and determined the outcome by getting most of Shas’s Knesset contingent to vote for Rivlin in the decisive second round.Besides the potential power of the centerleft and the early signs of its readiness to work together to challenge Netanyahu, the incident shows just how pivotal Shas could be in crowning the next prime minister.Indeed, the battle between the hawkish Yishai and the relatively moderate Deri could decide the outcome of a new center-left bid for power. Shas holds a deep grudge against Netanyahu – first for dropping them from the government and then for passing legislation to draft yeshiva students. Nevertheless, the hard-line Yishai still may want to back the Right, even if Deri prefers a new alliance with the center-left.Given the looming center-left challenge, Netanyahu is well aware of the political importance of mending fences with Shas.Despite his busy schedule and the hostage crisis, he has found the time to meet twice with Deri since the early June presidential election.Carefully watching all these developments is Foreign Minister Avigdor Liberman.The Yisrael Beytenu leader is keeping his options open, hoping to outflank Netanyahu, or whoever succeeds him, from the Left or the Right. Looking to the center-left, he praises Secretary of State Kerry; looking to the Right, he picks on UN Middle East envoy Robert Serry. Either way, he hopes to come across as the reliable tough guy with the clout to carry a two-state solution with the Palestinians or to defy the world in an ongoing one-state reality.The impending political clash between the center-left and the Right is mirrored on the ideological front by the emergence of new peace/modus vivendi plans. The almost wall-to-wall consensus is that the failure of the Kerry mission shows that, for now, a negotiated settlement is not possible. All the new plans have a common denominator – a large degree of unilateralism. For example, on the Right, Bayit Yehudi leader Naftali Bennett is calling for Israeli annexation of the Etzion Bloc as a prelude to the annexation of “Area C,” which comprises about 60 percent of the West Bank.Most right-wingers recognize that this will not fly with the international community.Former Judea and Samaria Settler Council head Dani Dayan, therefore, is advocating a largely unilateral plan that would enable Israel to continue its occupation of the West Bank ad infinitum by giving it a more human face. In an early June op-ed in The New York Times, Dayan called for an ambitious Israeli initiative to boost the Palestinian economy and improve the quality of Palestinian life by, inter alia, lifting road blocks; allowing free passage to work in Israel; enabling quick and easy access to Israeli and Jordanian airports; including Palestinians on planning and building committees; mobilizing international and Israeli investment in Palestinian infrastructure, education and health; and rehabilitating Palestinian refugee camps.In other words, creating a more palatable one-state reality for the occupied and for the international community while denying the Palestinians political rights in an Israelidominated one-state reality.On the center-left, the unilateralist goal is to create a two-state reality that might, over time, lead to a negotiated two-state solution.Lapid, for instance, is now advocating a three-stage process with strong unilateralist elements. In stage one, “preparation,” Israel withdraws from all West Bank areas devoid of settlements and institutes a building freeze everywhere except in the large settlement blocs, while retaining the right to take military action wherever deemed necessary.In stage two, “confidence building,” Israel relocates settlers from isolated settlements in the large settlement blocs and launches American-mediated talks on final borders.In stage three, “adjustment,” Israel withdraws to agreed borders with land swaps, brings moderate Arab Sunni states into a wider regional agreement and launches talks with the Palestinians on the remaining core issues. Lapid is also urging Netanyahu to call a regional peace conference to help get the peacemaking show on the road.In the Labor party, a plan by Knesset Member Omer Bar-Lev for a unilateral Israeli withdrawal is gaining ground.Under the plan, dubbed “It’s in our hands,” Israel withdraws from around 60 percent of the West Bank and evacuates 35,000 Jewish settlers while maintaining control of Jerusalem and the Jordan Valley. It then recognizes Palestine in temporary borders and calls on the Palestinians to negotiate permanent borders and all other core issues on a state-to-state basis.In Bar-Lev’s view, his plan has three main advantages: It gives the Palestinians a strong incentive to negotiate improved permanent borders; it gets the international community off Israel’s back; and, most importantly, it achieves Zionism’s main goal – a democratic state with a large Jewish majority.If he wants to stave off the center-left challenge – and the threats to his leadership within the Likud and from the Right – Netanyahu may have to come up with a dramatic initiative of his own.Simply treading water the way he has been doing for the past five years may not be enough.