Turkey Snubs Possible Energy Deals with Israel After Gaza Offensive

Turkey is unlikely to sign any energy deals with Israel for the construction of a gas pipeline to Turkey because of a deepening political rift over Israel's Gaza offensive, Turkish Energy Minister Taner Yildiz said on Tuesday.

Ties were severely damaged following a deadly raid by Israeli commandoes on a Turkish yacht carrying pro-Palestinian activists defying a Gaza blockade in 2010. But Israeli firms had more recently held fruitful talks with Turkish private companies and energy officials as part of a tentative rapproachment.

However, Israel's Gaza offensive in July that killed more than 2,000 people undermined those efforts and infuriated President Tayyip Erdogan, who likened Israel's actions to those of Hitler.

Israel has turned into a potential gas exporter overnight with the discovery of Tamar and Leviathan, two of the largest gas finds in the past decade. Tamar began production in March 2013, and its partners have already signed a number of lucrative deals in Israel.

Talks between the Leviathan consortium and Turkish counterparts have seen slow progress over the last year. A political solution has always been the condition for an ultimate deal.

"For energy projects to proceed, the human tragedy in Gaza will have to be stopped and Israel will have to instate a permanent peace there with all elements," Minister Yildiz told reporters in Ankara.

"It is out of question to proceed on any energy project unless a permanent peace is established, with contribution from all sides and with necessary conditions. A human tragedy unfolded (in Gaza), it is all too easily forgotten."

Turkey was once Israel's closest strategic ally in the region. But Erdogan has been a strident critic of Israel's policy on the Palestinians and has been highly critical of the Jewish state since the Gaza hostilities erupted.

Pro-Palestinian sentiment runs high in mostly Sunni Muslim Turkey and protestors have repeatedly taken to the streets in July to demonstrate against Israel's offensive, prompting Israel to reduce diplomatic presence in Turkey.

The talks between Israel and Turkey have focused on building a 10 billion cubic metre (bcm) sub-sea pipeline at an expected cost of $2.2 billion, giving Israel access to a major emerging market and one of Europe's biggest power markets by 2023.

Despite the opposition in political and business circles in Turkey, Israeli businessmen are still holding out hope that a deal may be struck in time.

Yitzhak Tshuva, the billionaire owner of Delek Group, the main partner in Leviathan, told Reuters this week that he remained optimistic about a deal being struck with Turkey once the current political chill passes.

"I believe, yes, and I want (an agreement)," he said.

(By Orhan Coskun, Additional reporting by Tova Cohen in Tel Aviv; Writing by Humeyra Pamuk, editing by Jonny Hogg and Ralph Boulton)