A 2010 publication of the U.S. Geological Survey caused major excitement in Cyprus, an island that at the time was suffering from the economic collapse of its neighbor and major trading partner, Greece. According to the publication, the seabed of the Eastern Mediterranean could contain up to 120 trillion cubic feet (tcf) of natural gas.3 Three years later, the Cypriot administration has high hopes that natural gas exports may get Cyprus—the third smallest European Union member state—back on its feet, after its own financial collapse in 2012. Unfortunately for the Cypriots, the reality on the ground is sobering, and it is currently unclear whether Cyprus will become a producer, or an exporter, of natural gas. Around Cyprus, other countries hope to benefit from the energy potential as well, including Israel, Lebanon and the Palestinian Authority. In the Israeli Exclusive Economic Zone (EEZ), in particular, substantial reserves of natural gas have been found, though the verdict is out whether these will in fact all be produced.

Exploration of Cyprus’s offshore concessions is at an early stage. Energy majors such as ENI and Total are among the first to explore possible gas (and oil) reserves and they expect results not before 2015. To date, only two test wells have been drilled by Houston-based Noble Energy. Proven reserves have been downgraded since and are currently estimated to be between 3 and 5 tcf. At this level of reserves, investing in a natural gas liquefaction terminal, which the Cypriot administration has supported, is not economically viable. A better alternative would be to construct a pipeline to Turkey, which has a large and rapidly growing market for natural gas.

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• Politics Trump Economics in the Complex Game of Eastern Mediterranean Hydrocarbons

The recent outbreak of hostilities between Israel and Hamas is a serious setback to ongoing Turkish-Israeli normalization efforts. Israel launched Operation Protective Edge, its third operation against Hamas since leaving Gaza in 2005, in response to rockets and missiles fired by Hamas from Gaza into Israel. As in Israel’s two previous Gaza campaigns, Operation Cast Lead (2008-09) and Operation Pillar of Defense (2012), Turkey quickly condemned Israel’s actions, yet offered to mediate, together with Qatar, between Israel and Hamas.

After Turkish Prime Minister Recep Tayyip Erdogan, in the midst of his presidential campaign, equated Israeli policy towards Gaza to a “systematic genocide” and accused Israel of surpassing “Hitler in barbarism,” Israel accepted an Egyptian cease-fire proposal. Israeli Foreign Minister Avigdor Lieberman accused Turkey and Qatar of “sabotaging the cease-fire proposal,” and Israeli Prime Minister Benjamin Netanyahu complained to U.S. Secretary of State John Kerry about Erdogan’s statements.

Turkish leaders’ harsh rhetoric sparked violent demonstrations in front of Israel’s embassy in Ankara and its consulate in Istanbul, lead the Israeli government to evacuate diplomats’ families, and issue a travel warning advising against travel to Turkey, which prompted numerous cancellations of tourist travel. On Sunday, Netanyahu refrained from declaring Turkish-Israeli reconciliation dead, but accused Erdogan of anti-Semitism more aligned with Tehran then the West.

These heightened Israeli-Turkish tensions come just as the two countries were negotiating a compensation deal for families of victims of the May 31, 2010 Mavi Marmara incident. The deal was intended to facilitate a long-awaited normalization between the two countries, more than a year after Israel’s official apology. The draft stipulated an estimated $21 million in Israeli compensation, the reinstatement of each country’s ambassador, and the reestablishment of a senior-level bilateral dialogue. However, a series of issues has prevented the deal’s finalization, including: Turkish domestic political considerations about the timing (related to March 2014 municipal elections and August 2014 presidential elections) and Israeli demands for Turkish commitments to block future lawsuits related to the Marmara incident.

With the ongoing Gaza conflict, prospects for normalization have again faded at least in the short term, and policymakers on both sides seem to have accepted a limited relationship. Erdogan even declared publicly that as long as he’s in power, there is no chance “to have any positive engagement with Israel”, dismissing any prospect for normalization. Israeli-Turkish animosity runs deep, not only among leaders, but at the grassroots level as well. While it may be difficult to look beyond the short term, a focus on the broader regional picture suggests four reasons why the two countries would benefit from restoring ties.

• First, they share strategic interests. Turkey and Israel see eye to eye on many issues: preventing a nuclear Iran; concerns over spillover from the Syrian civil war; and finally, the rise of the Islamic State of Iraq and the Levant (ISIS/ISIL) and security and stability in Iraq. A resumed dialogue and renewed intelligence sharing can pave the way for more concrete cooperation between Turkey and Israel on all these regional issues, with development of a joint approach toward Syria topping the agenda.
• Second, regional environment may be beyond their control, the bilateral relationship is not. Normalization can eliminate one factor of instability in an unstable region.
• Third, Washington sees greater cooperation and cohesiveness in the U.S.-Turkey-Israel triangle as essential. President Obama has sought to restore a dialogue between Ankara and Jerusalem, including efforts to “extract” an Israeli apology and Turkish acceptance. Senior U.S. officials remain active in trying to improve the Turkish-Israeli relationship.
• Fourth, normalization may convey benefits in the economic sphere, with possible cooperation on natural gas, tourism, and enhanced trade. Gas in particular is viewed as a possible game-changer. In 2013, bilateral trade first crossed the $5 billion mark, and data from the first six months of 2014 indicates a continued rise. A political thaw can help accelerate these joint business opportunities. 

Nevertheless, at this stage it is clear that serious U.S. involvement is required for Turkish-Israeli rapprochement to succeed, even in a limited fashion. At present, there are far greater challenges for U.S. foreign policy in the region. The question now is whether the relationship between two of America’s closest regional allies reflects a new “normal,” or whether the leaders of both countries – and the U.S. – can also muster the political will to reconnect the US-Turkey-Israel triangle along more productive lines.

Check back to Brookings.edu for Dan Arbell’s upcoming analysis paper: The U.S.-Turkey-Israel Triangle.

Turkish Foreign Minister Mevlut Cavusolu’s decision earlier this month to decline to participate in the Munich Security Conference due to Israeli ministerial participation marks a new low in the troubled Turkish-Israeli relationship.

And yet, the latest statistics released this week by the Israeli government document an overall volume of $5.44 billion dollars in Turkish-Israeli trade during 2014. This marks an all-time high point in Turkish-Israeli economic relations, up 11.5 percent from 2013, including $2.75 billion in Israeli exports to Turkey (a 10 percent year-to-year increase) and $2.68 billion in Turkish imports to Israel (13 percent higher than 2013).

This pattern of an almost non-existent political dialogue at the senior levels accompanied by robust bilateral trade has characterized the Turkish-Israeli relationship since 2011. Short of unexpected dramatic changes, the relations between the two former allies will likely continue in this pattern for the foreseeable future. 

Almost two years after Israel’s official apology to Turkey over the Mavi Marmara incident (which I wrote about in depth here), the two countries continue to move in different directions, despite sharing similar strategic concerns on a range of regional issues – the civil war in Syria, instability in Iraq and Iran’s nuclear program.

The main bone of contention between the AKP-led Turkish government and the Likud-led government in Israel remains the Palestinian issue. Turkey continues to speak out against Israeli occupation and settlement activity in the West Bank, as well as on Israeli human rights violations towards the Palestinian population. In addition, Turkey remains one of the main (very few) patrons of Hamas, providing the group with political and economic support and allowing the organization to maintain representation in Istanbul. Israel viewed with disdain Turkish attempts, together with Qatar, to facilitate a ceasefire with Hamas during the summer 2014 war. Anti-Turkish sentiments in Israeli public opinion skyrocketed in response to President Erdogan’s allegations that Israeli policies on Gaza are genocidal. 

Amidst rising tensions in the relationship, President Erdogan publicly vowed after his August 2014 election that as long as he’s in power, Turkey’s approach to Israel will not change. As a result, there are no serious expectations that any senior-level political dialogue will resume, and mutual representation is likely to remain at a junior diplomatic level (after ambassadors were withdrawn from Tel Aviv and Ankara in 2011).

The interesting aspect of the relationship continues to be the booming trade between the two countries, which despite political tensions continues to grow at a rapid pace. Clearly there is an interest on both sides to insulate the economic sphere from the political sphere. Robust trade serves both countries’ economic interests and during a very unstable period keeps the relationship afloat. Nevertheless, an Israeli – Turkish natural gas deal which was considered in the past as a likely scenario and possibly a regional and bilateral “game changer” seems at present to be “off the table.” Potential energy cooperation between Turkey and Israel around the Eastern Mediterranean natural gas discoveries may be possible only in the context of political rapprochement.