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  • Bilateral corporate deals in the private sector will continue as usual unless the companies decide otherwise, according to Today's Zaman.

The tensions between Israel and Turkey may have escalated a notch: Turkey reportedly froze billions of dollars worth of defense deals with Israel following the Israel Navy's raid on the aid flotilla to Gaza on May 31.

The report in the newspaper Today's Zaman has not been confirmed by any official announcements.

"There is no change at the moment in defense plans with Turkey. We have received no message," said a top Israeli defense official.

However, defense industry sources say it's probably just a matter of time before Ankara freezes defense deals with Israel. Some companies have already returned their representatives from Turkey.

Thursday's news followed Israel's refusal to apologize or offer concessions for the deaths of the Turkish citizens killed aboard the Mavi Marmara ship, the newspaper said.

The 16 projects reportedly suspended include a $5 billion deal for 1,000
Merkava Mark III tanks, a $50 million plan to upgrade Turkish M-60 tanks, and an $800 million agreement to buy two Israeli patrol aircraft and an Airborne Warning and Control System jet. Turkey is also putting aside a $632.5 million deal for 54 F-4 Phantom jets, and a $75 million program for 48 F-5 fighter bombers, says the report.

Bilateral corporate deals in the private sector would continue as usual unless the companies decide otherwise, according to Today's Zaman.

The earliest the frozen deals could be reinstated is after the next election in Turkey, say defense sources. But in fact, not all these deals are being executed and some already have been completed, say industry sources.

Top people in the army and Defense Ministry say they have received messages from their counterparts in the Turkish army decrying the anti-Israel bent in Ankara, led by Prime Minister Recep Tayyip Erdogan.

Flourishing relations take a downturn

The military alliance between Israel and Turkey developed in the mid-1990s. The two countries signed a series of agreements, including intelligence sharing and joint military exercises. Israel Air Force pilots flew in Turkish airspace and, according to foreign news reports, Israel placed monitoring stations on Turkey's borders with Syria and Iran.

The relations included a large number of contracts for Israeli companies to sell arms and systems, and to upgrade Turkish military systems. But, as the defense sources say, some of the deals never came to fruition and others are already done.

The warm relations began to cool not with the flotilla incident but a year and a half ago, when Israel embarked on Operation Cast Lead. In 2009, Turkey excluded Israel from its annual Anatolian Eagle military drill, and it has done so again this year.

Yet the two armies continued to cooperate: Israeli naval forces took part in a rescue exercise under the auspices of NATO, and three months ago, Turkish chief of staff General Ilker Basbug hosted Israel's top officer, Gabi Ashkenazi, at a conference in Ankara.

Two months ago Uri Shani, director-general of the Defense Ministry, participated in a ceremonial inauguration of Patton tanks that had been upgraded by Israel Military Industries. But military ties may have to be suspended as well until a change to a friendlier government.

The Defense Ministry said there has been no change in cooperation with Turkey. But a defense establishment source told TheMarker on Thursday: "I'm not sure we'll want to participate in Turkish tenders, given its relations with Iran."

On the suspension of defense deals, he said the only open transaction at the moment is the $180 million deal for drones - for which Turkey has already paid in full and six of the unmanned aerial vehicles have been delivered.