A decision to cut off military sales to Turkey would be a major blow to Israel's defense industry. It is the most sophisticated in the region but depends on exports to keep production lines running to equip Israel's armed forces.

The growing strains between the two countries, stemming largely from Ankara's increasing criticism of Israel's occupation of Palestinian territory, have imperiled a strategic alliance forged in 1996 that cemented military and intelligence ties.

Despite the mounting tension, the two countries have continued to do business over the last year even as Turkey has sought to project itself as a regional power and a defender of the Muslim world.

Israel is one of Turkey's main military suppliers and over the years has refurbished a wide range of Turkish equipment, and sold Ankara all manner of electronic equipment in which Israel's defense industry specializes.

In December 2008, subsidiaries of the state-owned Israel Aerospace Industries, flagship of the country's defense sector, and Elbit Systems signed a $140 million contract to provide the Turkish air force with targeting pods.

Israel Military Industries recently completed a $700 million contract signed several years ago to upgrade Turkey's fleet of 900 aging M60 Patton main battle tanks.

Israel Aerospace Industries has also provided Turkey with advanced long-range Heron unmanned aerial drones.

Even so, according to The Jerusalem Post, Israel "was not invited in September to present a proposal for a missile defense system that Turkey is interested in buying, though it asked U.S., Chinese and Russian companies to bid."

The Post quoted Defense Ministry officials as saying that several Turkish requests for military systems that were being considered by the ministry's Foreign Defense Assistance and Defense Export Organization, known as Sibat, would now be reviewed in light of the strained diplomatic relations with Ankara.

For now, the Israeli government has sought to play down the chill in relations.

Deputy Foreign Minister Danny Ayalon said Sunday: "Turkey is very important, and our relationship is very strategic. Turkey is very important for the stability and promotion of peace in the Middle East."

Relations between the two countries have been deteriorating since Turkey's Islamic-oriented Justice and Development Party, or AKP, took power in 2002 under the leadership of charismatic Prime Minister Recep Tayyip Erdogan.

They nosedived sharply Jan. 29 when Erdogan stormed out of a debate on Israel's invasion of the Gaza Strip in December 2008 at the World Economic Forum in Davos, Switzerland.

Erdogan accused Israel of "barbarian acts" during the 22-day Gaza war in which some 1,400 Palestinians, most of them civilians, were killed by vastly superior Israeli forces.

Erdogan yelled at Israeli President Shimon Peres: "You know well how to kill people."

Then on Sunday, Ankara announced the postponement of the international section of the Anatolian Eagle air exercises, which have been held annually in central Turkey with Israel, the United States and NATO countries since 2001.

Erdogan has been under growing domestic pressure to exclude Israel from the maneuvers while its warplanes continue to attack Gaza.

The United States and Italy have since pulled out of the exercises to protest Ankara's decision.

Under the 1996 alliance between the Jewish state and Turkey, a Muslim country, albeit ideologically secular, Turkey became Israel's best friend in the Muslim world.

The alliance, one of the most significant in the Middle East, stemmed from a recognition of mutual security interests. Both countries were isolated regionally and at that time shared common foes in Syria, Iran and Iraq.

But all that changed when the AKP rose to power. In large part, this was due to the reduced influence of Turkey's military, a key driver behind the 1996 alliance and which has wielded immense political power for the last century.

earlier related report
Turkey urges 'common sense' in rekindled row with Israel
Ankara (AFP) Oct 12 - Turkey called on Israel on Monday to show restraint in reactions to the scrapping of joint military drills, in a new episode of tensions between the two regional allies.

The Turkish foreign ministry said it was "not right to make political conclusions out of the postponement of the exercises."

"Assessments and comments attributed to Israeli officials in the press are unacceptable. We invite Israeli officials to common sense in their statements and attitudes," a statement said.

Israeli media have quoted anonymous officials as saying that the sale of advanced arms to Turkey would be reviewed.

The Turkish military said last week the international section of the "Anatolian Eagle" air exercises, carried out annually since 2001 in central Turkey, had been "postponed."

The Israeli military said the exercises were scrapped after Ankara excluded Israel, a decision which, according to media reports, prompted the United States to pull out from the drills.

Israel's Defence Minister Ehud Barak on Monday cautioned against blowing the incident out of proportion.

"The relations between Israel and Turkey are strategic, stretching back dozens of years," Barak said, according to a statement from his office.

"Despite all the ups and downs, Turkey continues to be a central actor in our region. There is no need to be drawn into hostile statements about them."

The Anatolian Eagle manoeuvres are important for Israel as they provide an opportunity for its warplanes to train in vast airspace unavailable in their own country.

Once-flourishing Turkish-Israeli ties took a sharp downturn in January when the Islamist-rooted government in Ankara launched an unprecedented barrage of criticism against Israel for its devastating war on the Gaza Strip.

On January 29, Prime Minister Recep Tayyip Erdogan stormed out from a debate on the Gaza war in Davos, Switzerland after accusing Israel of "barbarian" acts and telling Israeli President Shimon Peres, sitting next to him, that "you know well how to kill people."

The Gaza offensive also led to the disruption of indirect peace talks between Israel and Syria that Turkey had mediating since May 2008.

Turkish Foreign Minister Ahmet Davutoglu signalled on Sunday that Israel's offensive on Gaza and ongoing turmoil in the Palestinian enclave contributed to Ankara's decision to exclude the Jewish state from the drills.

"We hope that the situation in Gaza will be improved, that the situation will be back to the diplomatic track. And that will create a new atmosphere in Turkish-Israeli relations as well," Davutoglu told CNN, according to the US network's website.

"But in the existing situation, of course, we are criticizing this approach, the Israeli approach," he said.

In September, the minister reportedly cancelled plans to visit Israel after he was denied permission to visit the Hamas-run Gaza Strip.

Mainly Muslim non-Arab Turkey has been Israel's chief regional ally since the two signed a military cooperation deal in 1996.

However, Ankara also has close ties with the Palestinians and supports their struggle for statehood, a cause which is dear to both Islamist and leftists in the country.

Turkish criticism of Israel has mounted since Erdogan's Justice and Development Party, the moderate offshoot of a now-banned Islamist movement, came to power in Ankara in 2002.

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