The election of Tzipi Livni as leader of Israel's centrist Kadima party is a potentially pivotal moment for the Middle East. Much hope has been pinned on her commitment to the peace talks with Palestine launched in Annapolis at the end of last year.

As Foreign Minister, she has been the lead negotiator for Israel, favouring a two-state solution, which would make some territorial concessions to the Palestinians. Her diplomatic ambitions, however, will be tempered by domestic politics. If she is to become Israel's second female Prime Minister she must form the coalition government necessitated by Israel's finely-calibrated model of proportional representation and failure to do so will precipitate a General Election which is likely to be won by Benjamin Netanyahu's right-wing Likud party. Foreign policy, particularly the Palestinian peace talks, will intermesh with domestic policy as a key element of the negotiations with potential coalition partners, leaving the question of how far she is prepared to trim her policy ambitions.

The future of Jerusalem is one of the issues at the heart of the negotiations and the ultra-Orthodox Shas Party, which could be key to building a new coalition, has already served notice that it would not join a government that is willing to negotiate the fate of Jerusalem with the Palestinians. It also wants increased child allowances for the large families which form its core voters and lost no time yesterday in naming improved welfare benefits as the price of it remaining in the coalition.

The undue influence of small and extremist parties is only one of the obstacles facing Tzipi Livni. The narrowness of her victory in the party leadership contest, in which her opponent, Shaul Mofaz, presented himself as the hard-headed defender of Israeli security interests, means she will have to prove herself to her own supporters as well as her political partners and allay the fears of both that a leader without deep roots in the military would not protect Israel in a crisis.

Her uncompromising refusal to allow 4.6 million Palestinian refugees the right to return to land now in Israel or to rule out military options against Iran may win her hawkish points, but the reality of both Israeli and Palestinian politics means that despite Ms Livni's commitment the prospect of peace remains a long way off. Certainly, President Bush's hopes of seeing the impetus from Annapolis come to fruition before he leaves office must be regarded as over-optimistic, but if she succeeds in remaining in office until January, the next US President must speed her ambitions for a peaceful settlement.