The 2009 elections have created ambivalent results that have great implications for Israel’s politics and the so-called Israeli-Palestinian peace process. While it is true that the “Left” was smashed, the Right, while returning to power after disastrous showing in the previous election, did not really win: the ideological split between Likud and Kadimah was reaffirmed when Livni refused to joined Netanyahu, thus forcing Netanyahu in his “second coming” to rely on his ideological/political rivals in Labor. So although the Right has assumed power formally, in reality it lost its main struggle, the struggle for “Greater Israel” (or the eventual annexation of the West Bank & Gaza). The loss of the big ideological battle (on the “inside”) was confirmed (on the “outside”) when the Obama Administration came out in a stronger way than most observers have expected for a Two-State Solution and a complete termination of Israel’s settlement activity. The Obama position negated the Right’s long-term goal (annexation) and short-term tactics (aggressive settlement activity). Conceptually, we can refer to what has been happening to the Israeli Right as “Losing Despite Winning”. While the Right might have won tactically (that is, its head became the Prime Minister), it has lost strategically (that is, in achieving its main policy goals). What I once called the “Territorial Imperative” (Barzilai and Peleg, Journal of Peace Research, 1994) has become weaker, not stronger. The process at hand will be assessed from three different perspectives: a) historically, the “Right” has been retreating from the vast territorial ambitions of Jabotinsky and Begin, and even Shamir and Netanyahu I (1996-9), to an official and public acceptance of a Two-State solution, probably in about 80% of Western Palestine; b) ideologically, the retreat of the Right is even more pronounced—while the Left and the Center have always accepted the principle of territorial compromise and partition (1937, 1947, 1949-67, post-1967), the Right always opposed it; Netanyahu’s Bar-Ilan speech could thus be interpreted as admitting defeat or realizing that the Right’s ideological purity cannot be sustained; c) culturally, the forthcoming withdrawal from the Occupied Territories is linked to the effort to maintain Israel as a “Jewish State” (or strengthening the “Ethnic Imperative”), as emphasized by Netanyahu’s speech. The paper will argue that, given recent developments, even this modest goal is unlikely to be successful.