There has been a noticeable cooling in what were normally mutually beneficial relations between Turkey and Israel in recent months mostly as a result of the Turkish Prime Minister Erdogan's harsh criticism of Israels war against Hamas in early 2009.
This time, the cooling of relations has manifested itself in Turkey's rescheduling of NATO military maneuvers so that Israel would not be able to participate. To add insult to Israel's injury at being left out of these maneuvers, Turkey agreed to hold further aerial (ground maneuvers had already taken place) exercises with Syria, a state officially at war with Israel.
While the US "gently" criticized Turkey for the move suggesting that it's never appropriate for any country to be excluded from an event like the NATO maneuvers at the last minute. Turkish officials have apparently sent messages to Israel suggesting that despite the Turkish Prime Minister's harsh rhetoric, Israel should just let things blow over. Israel seems slightly more concerned though and seems to want to nip these tensions in the bud. This may be inferred from statements that Israel will not enter a war of words with Turkey through the media suggesting that any talks should be done directly between the states. Indeed, some Israeli officials have explicitly expressed their concern that ties between Israel and Turkey may have been seriously damaged because of the war against Hamas.
Turkey's increasing distance from Israel ought to be of real concern to Israel. Much of it has to do with domestic Turkish issues, a leader more interested in ties with the Muslim world than with the West, a government more interested in siding with Hamas than with the EU--which it nonetheless wants to join. To Israel, this may make Ankara appear to be an unreliable partner, but in fact, it probably places Turkey in a position to be an important catalyst for peace and as a power able to exert real pressure on both Israel and Hamas.
To Hamas, Turkey is one of the few states openly supporting Gaza and vocally criticizing Israel. This makes Turkey, in many ways a friend of Hamas and a country they may be uninclined to alienate, especially given Turkey's good relations with the west, as opposed to other Hamas supporters like Syria and Iran which are not in the good books of powers like the EU and US.
To Israel, however, Turkey in important on many levels. First, there is the intangible benefit to Israel of having beneficial relations with a Muslim country in the region. Though Turkey is not an Arab country, as Muslims having relations with Israel, they sent a message that relations with Israel were beneficial and possible for other Muslim countries.
On a more tangible level Turkey was an important client of the Israeli arms industry which is now reportedly suffering as a result of the new Turkish attitude. Similarly, Turkey was to be a potential solution to Israel's water shortfalls. These are real benefits to Israel that are now being lost and it's hard to know exactly what Israel would do to reverse its losses.
Israel can hit back at Turkey. They can point out Turkey's treatment of its Kurdish population, or officially recognize the Armenian genocide (which they should do, on principle) but both of these are unlikely as they would further isolate a country that Israel needs good relations with.
The US may be Israel's closest ally and the one least likely to mount serious pressure on the Israeli government but Turkey can mount pressure because it is important to Israel, but its ties are less secure. Turkey can be an important player in making peace in the middle east. Hopefully, they recognize this power and will wield it wisely.
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