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Turkey-Israel Detente Advances Fueled by Energy Potential

Turkey and Israel may soon renew diplomatic ties, suspended after Israeli commandos killed nine Turks in a raid on a Gaza Strip-bound flotilla, Turkish Foreign Minister Ahmet Davutoglu said.

Turkey’s willingness to renew ties with Israel is being fueled by the domestic troubles of Turkish Prime Minister Recep Tayyip Erdogan, and the prospect of a pipeline shipping Israeli offshore gas to Turkey, analysts say.

Davutoglu told Turkey’s A Haber television station yesterday that the two nations were still discussing the terms of financial compensation for those killed during the clash aboard the Mavi Marmara ship as it attempted to break Israel’s sea embargo of Gaza.

“An important step will be taken with the compensation,” Davutoglu said. “We’re living through a period in which we are closer than ever to normalizing ties after the Mavi Marmara.”

While significant progress has been made in the negotiations, Israel is still seeking guarantees from Turkey that the soldiers who took part in the naval raid be granted immunity from any future criminal prosecution, according to a person familiar with the talks.

The office of Israeli Prime Minister Benjamin Netanyahu declined to comment on the negotiations with Turkey, as did the Foreign Ministry. Israeli newspaper Haaretz said last week that Netanyahu’s government has offered Turkey $20 million in compensation, citing unidentified Western diplomats.

Israeli Apology

Netanyahu apologized to Erdogan last March for “any mistakes that might have led to the loss of life or injury” abroad the ship. Israel says its blockade is intended to prevent arms shipments to Gaza militants, and that its soldiers fired on the Turks after they were attacked with metal rods and knives by activists aboard the ship.

The deaths soured ties between Israel and the country that once was its closest ally in the Muslim world. Turkey, which had maintained a strong alliance with Israel’s military, expelled Israel’s ambassador, recalled its own and pulled out of joint war games. The number of Israeli visitors to Turkey dropped to 84,000 in 2012, before Netanyahu’s apology, from 560,000 in 2008, according to Turkish government data.

While Israeli military sales to Turkey were halted, other trade ties proved resilient, rising to nearly $4.9 billion in 2013 from $3.5 billion in 2012, according to Israel’s Central Bureau of Statistics.

Probe Distraction

Erdogan may be looking to renew ties with Israel to divert attention from a graft corruption that’s ensnared his government, analysts said.

Turkey has dismissed and reassigned prosecutors and thousands of police involved in the investigation, which has implicated sons of three ministers and the head of a state bank. Erdogan’s allies have called the investigation an attempt to discredit his government ahead of March 30 local elections, and have accused U.S.-based Turkish cleric Fethullah Gulen of orchestrating it.

Gulen criticized Turkish organizers of the Mavi Mamara-led flotilla for defying Israeli curbs on shipment to Gaza and straining ties between the countries.

By moving toward rapprochement with Israel, “Turkey sends a strong message of alliance to the United States by improving ties with Israel in the region,” said Nihat Ali Ozcan, an analyst at the Economic Policy Research Foundation in Ankara. “It also takes the sting out of Gulen’s criticism and gives the government ammunition in the election campaign by saying that Israel was not only forced to apologize, but pay compensation.”

Gas Conduit

Another key driver is Erdogan’s desire to see Israel export natural gas off its Mediterranean coast to Europe via a pipeline routed through his nation, said Alon Liel, former director-general of Israel’s Foreign Ministry.

“Erdogan really, really wants that gas, and could spin an agreement as Israel basically conceding to Turkey,” said Liel, a past chairman of the Israel-Turkey Business Council.

The partners in Israel’s Leviathan gas field -- U.S.-based Noble Energy Inc. (NBL) and Israel’s Delek Drilling-LP (DEDRL), Avner Oil Exploration LLP (AVNRL) and Ratio Oil Exploration 1992 LP (RATIL) -- last month asked Turkish companies to submit proposals for marketing the gas. Turkey’s Zorlu Enerji (ZOREN) said in October it had already held preliminary talks with the Leviathan partners on taking part in the transport and distribution of the Israeli gas.

Over the weekend, Australia’s Woodside Petroleum Ltd. said it plans to buy a quarter of the field for as much as $2.6 billion.

To contact the reporters on this story: Calev Ben-David in Jerusalem at cbendavid@bloomberg.net; Selcan Hacaoglu in Ankara at shacaoglu@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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