JERUSALEM, July 19 (JTA) — Few doubt that Prime Minister Ariel Sharon’s disengagement plan has the potential to become a watershed event in Middle Eastern politics, and it already is causing major upheavals in both internal Israeli and Palestinian politics. Sharon is being forced to widen his coalition to ensure a parliamentary and Cabinet majority for the plan, while on the Palestinian side the impending Israeli pullout from the Gaza Strip has triggered an unprecedented challenge to Palestinian Authority President Yasser Arafat’s authority, as well as demands for a new style of governance. It’s not yet clear what kind of coalition Sharon will form, nor how the violence and confusion among the Palestinians will play out. But if Sharon is able to build a strong coalition and if a new, more pragmatic Palestinian government emerges from the present chaos, the current turmoil could be a prelude to a significant breakthrough in Israeli-Palestinian relations. Sharon’s coalition negotiations, though, are going to be very tricky. Given the widespread opposition in his own Likud Party to the plan for Israeli disengagement from the Palestinians, Sharon needs to bring in the pro-disengagement Labor Party to ensure approval for his plan in the Cabinet and Knesset. Ideally, Sharon would like to build a secular coalition with the center-right Likud, center-left Labor and centrist Shinui Party, which would command over 70 seats in the 120-member Knesset and see eye-to-eye on a disengagement agenda. But Sharon’s Likud opponents argue that such a coalition would lead to policies too accommodating toward the Palestinians and to a dilution of the Likud’s conservative economic policy, which is pulling Israel out of recession. Worse, they maintain, if Sharon forms a coalition with only Likud, Labor and Shinui, it will be perceived as too middle-class and Ashkenazi, and the Likud would lose at least half of its working-class, Sephardi constituency in the next elections. “We would drop from 40 to around 20 Knesset seats,” says Foreign Minister Silvan Shalom, who is considered something of a political savant in the Likud. But Shalom is part of the problem: He’s concerned that if Labor joins the government, he might lose the Foreign Ministry to Labor leader Shimon Peres. So far, Sharon is not making any promises, but he will be very wary of taking on Shalom in the Likud Central Committee. The foreign minister wields tremendous clout in that forum, which he intends to display at a huge rally scheduled for July 25. Moreover, Shalom is intimating that he’s ready to form an alliance with his old enemy, Finance Minister Benjamin Netanyahu, if he feels Sharon isn’t treating him right. Such an alliance could seriously threaten Sharon’s hold on power in the party and the government, if the policy and personal differences lead to a showdown. That’s why Sharon has been forced into opening coalition talks with two fervently Orthodox parties, the Ashkenazi United Torah Judaism bloc and the Sephardi Shas Party. Together they have 16 seats in the Knesset and could replace Shinui — which now has 14 seats — to form a stable government with Likud and Labor. That would allow Sharon to be generous to Labor with Shinui’s portfolios, Peres could be given a special peace portfolio rather than the Foreign Ministry, and the Likud would be able to keep its working-class voters. But that would be less than ideal for Sharon. The fervently Orthodox parties, which tend to the right, could undermine the disengagement plan or threaten to undermine it unless they get concessions on religious issues or bigger budgets for religious institutions. Sharon would like to see the fervently Orthodox balanced by the staunchly secular Shinui — but each side refuses to sit in a coalition with the other. Shinui’s leader, Justice Minister Yosef “Tommy” Lapid, is livid with Labor for its willingness to serve in a government that includes the fervently Orthodox but not Shinui. He warns that if Labor joins such a government it will be signing its death warrant, because Shinui in opposition will capture most of Labor’s traditional support. “If Labor joins a government with the ultra-Orthodox, we will give it a donkey’s burial,” Lapid declared. Some Labor leaders, such as Haim Ramon, still are trying get Shinui into the coalition as part of a longer-term political vision. Ramon sees a Likud-Labor-Shinui coalition burgeoning into a new centrist party that could dominate Israeli politics for years to come. To get more support for a coalition with Labor and Shinui, with or without the fervently Orthodox, Sharon is warning Likud rebels that if they don’t support him the inevitable result will be new elections, which could cost many of them their Knesset seats. To solve the Shalom problem, pundits believe Sharon will leave him at the Foreign Ministry and offer Peres, in addition to the special portfolio, a “forum-of-two” mechanism, whereby the two elder statesmen would make key decisions together, regardless of whether Shinui, the Orthodox parties or both wind up in the coalition. Sharon and Peres, though, take very different views of the current chaos on the Palestinian side. Sharon says the chaos highlights the fact that there is no Palestinian partner and that Israel has no choice but to take unilateral action. Peres says the chaos shows the danger of pulling out of the Gaza Strip without talking to Palestinians who are in a position to maintain law and order about a transition of power. Israeli intelligence analysts say it’s too early to count out Arafat, despite the unprecedentedly overt criticism of him and his regime by Palestinians. But if the voices of reform are able to enforce law and order by reforming the Palestinians’ myriad armed forces, or if they can force Arafat to do so, a new chapter in Israeli-Palestinian relations could open. The indications on the ground are that Israel has virtually won the intifada war: More and more Palestinians are questioning its rationale and acknowledging its failure to bring any political gains. Indeed, this sense of failure is the mainspring behind the growing criticism of Arafat. The question now is whether Sharon, by building a new coalition and pushing his disengagement plan through, can turn Israel’s advantage on the ground into political coin. Leslie Susser is the diplomatic correspondent for the Jerusalem Report.