Next week marks the 30th anniversary of the peace treaty between Israel and Egypt. For a generation this document has guaranteed that Israel will not come under attack from Arab armies. So it is surprising that the next foreign minister of Israel – barring some upset in the still incomplete coalition negotiations – will be Avigdor Lieberman, the man who used the podium of the Israeli parliament last year to tell President Hosni Mubarak of Egypt to “go to Hell”.

Lieberman has plenty of form in beer hall politics: he once called for the bombing of the Aswan dam, and has offered to provide buses to take Hamas prisoners to the sea and drown them. His party, a lobby for Russian-speaking immigrants, came third in the elections thanks to a platform calling for Palestinian citizens of Israel to take an oath of loyalty or be stripped of their citizenship. Not surprisingly, there is little appetite in Cairo for celebrating this anniversary.

In the past, foreign ministers were employed to disguise Israel’s iron fist with fine words tailored to selected foreign audiences. Lieberman will be showing a new face of Israel to the world – a populist with overtly racist views and a thuggish demeanour. Some supporters of Israel are in despair. Following the Gaza invasion, Israel is losing the support of Turkey, a key regional ally, and in parts of Europe it is increasingly seen as apartheid-era South Africa on the Mediterranean. The Israeli foreign ministry might as well scrap its multimillion dollar cultural diplomacy initiative.

But Lieberman is not a passing phenomenon. He represents the integration into Israeli politics of the million immigrants from the former Soviet Union. These new immigrants have displaced the old Labour party, once the elite of the country and the so-called party of peace. In every Labour voter there was a sepia-tinted memory of a kibbutznik taking his horse to be shod in an Arab village. If this fantasy of Jewish-Arab co-operation was ever true, it stopped being so in the 1920s. But the Labour party has always felt that somehow the Arabs can be forced to love, or just get along with, Zionism – a viewpoint which used to sell easily in Europe and the US, even if it never corresponded with facts on the ground.

The Russian-speaking immigrants have no truck with such illusions. They came in waves in the 1970s, believing they were coming to a “civilised, European” country. They found that one fifth of the population of Israel was of Arab origin. And worse, they found that they were looked down on as accidental immigrants, who came to Israel only because they could not get to America. “Russian” became a term of abuse, for someone whose goal was to dump granny on the Israeli welfare state and head off to New York.

With Lieberman the immigrants have got their revenge. The Labour elite is crushed. Lieberman’s discourse derives not from the early years of Zionism but from the Leninist thinking of the old USSR, where any negotiation was a zero-sum game, with one clear winner and one outright loser. For Lieberman, it is not enough that Egypt has a peace treaty with Israel; the head of state must come and pay regular visits to the Holocaust memorial in Jerusalem. It is not enough that the vast majority of Israeli Arabs live peaceful and productive lives despite widespread discrimination; they must sign up to the ideals of the Zionist state or lose their citizenship.

Lieberman alone is not going to destroy hopes for peace, as lazy headlines might suggest. Benjamin Netanyahu, the prime minister-designate, opposes a Palestinian state. With or without Lieberman, Israeli policy would be to nurture the Hamas-Fatah split among the Palestinians, which rules out any serious negotiation; the Obama administration’s zeal for knocking Israeli and Palestinian heads together will no doubt flag as the new president is ground down by his battles with Wall Street and the shooting war in Afghanistan.

The dangers are longer-term. Israel is choosing a man who has acquired the image of a mini-Milosevic, determined to create a Jewish state by dint of hiving off Arab-inhabited parts of Israel to the Palestinian territories, and threatening to deprive the remainder of their civil rights.

No doubt as foreign minister he will moderate his tone, having successfully raised his profile during the election campaign as a straight talker who says what other politicians do not dare to utter. But whatever image massaging takes place, there is no disguising the fact that a watershed has been crossed. The issue of the Israeli Arabs is crucial for the Jewish state. So long as they were full citizens, they were evidence that Arab and Zionist could coexist and that Israel, for all its discrimination, held to some basic tenets of democracy. In fact, successive Israeli governments destroyed this precious charge, by discriminating in land, housing and jobs. The sepia-tinted dream of the kibbutznik and the Arab farrier has been dying for years, and Lieberman administered the coup de grace.

We are now in the land of zero-sum: Lieberman – and a good proportion of the Israeli electorate – will not tolerate the presence of Israeli Arabs as a badge of Israel’s democratic credentials. In his view, they must be with Israel or against it. With the future of the Israeli Arabs now in question, the cloak of democracy is falling away.