TEL AVIV // After Israeli commandos killed nine Turkish activists on a Gaza-bound aid flotilla last year, it was widely believed that Israeli-Turkish relations could not get any worse.
But now, the ties between the two formerly close allies appear to have reached a new low.
Recep Tayyip Erdogan, Turkey's prime minister, announced that trade, including defence industry contracts, would be suspended and threatened that the country's naval patrols in the eastern Mediterranean would be increased. His statements came just five days after Turkey expelled the Israeli ambassador in Ankara and froze all military agreements with Israel.
Israeli media reported that all the senior diplomats in Israel's embassy in Ankara were to be expelled from Turkey by today, including the deputy ambassador and military attaché, with only low-level officials remaining.
Turkey has been angered by Israel's refusal to apologise for raiding the ship in May 2010, and has claimed that the Israeli siege of the Gaza Strip lacks legitimacy and should be lifted.
Israel's predominantly right-wing government, however, has adamantly refused to apologise for the raid, claiming it was justified because the ship's passengers tried to violate the country's naval blockade on the Palestinian enclave.
Prominent Israeli officials yesterday reiterated that Israel will not heed Turkey's demand. Reuven Rivlin, the speaker of Israel's parliament and a senior member of the ruling Likud party, said Turkey's insistence on an apology was "misplaced".
The conflict this week escalated beyond diplomacy and trade. The tourism industry also seems to be a victim of the crisis, with Israeli travel agents reporting mass cancellations yesterday, a day after a group of 40 Israeli business people and other travellers on board a Turkish Airlines flight from Tel Aviv to Istanbul complained they were mistreated by Turkish airport authorities.
Yesterday, Israeli media had accounts of the travellers' claims, including that they were separated from the rest of the plane's passengers, had their passports taken by police and questioned individually at length. Additionally, several Israeli passengers on a Thailand-bound flight passing through Istanbul claimed they were "humiliated", with one woman saying she was told by a female police officer to strip down to her underwear.
When Israel's foreign ministry asked its Turkish counterpart for an explanation, it was told that Turkish tourists received a similar treatment at Israel's Ben-Gurion airport on Sunday when they arrived to mark the end of Ramadan in Jerusalem, the Haaretz daily reported yesterday. The report stated that the Turkish tourists said their luggage was checked numerous times and that they underwent a full body search.
The incidents prompted right wing Israeli politicians to call for a tourism boycott against Turkey yesterday, once a favourite site for Israelis seeking a nearby holiday destination that was cheaper than other countries in Europe. "Our relationship with Turkey is important, but it's even more important to maintain our national pride," Miri Regev, a politician from the ruling Likud party, said yesterday.
Financial ties between the two countries are also unravelling.
Helman-Aldubi, an Israeli investment firm managing some 8.5 billion shekels (Dh8.6bn) in assets, said on Monday that it would no longer invest its clients' funds in Turkey because such an investment was deemed risky amid the current tensions. Israel's Bank Hapoalim, one of the country's biggest lenders, was reported by Israeli media yesterday to be mulling selling its 70 per cent stake in Turkey's Bankpositif despite the lucrative potential of the Turkish banking market.
On Monday, Stanley Fischer, Israel's central bank governor, expressed concern about worsening trade ties with Turkey, warning that the consequences of the deterioration in relations "will be potentially expansive,// IS EXPANSIVE THE WORD OR EXPENSIVE??? // especially for us".
Turkey has conveyed contradictory messages about its intention in doing business with Israel. On Monday, the country's economy minister said there would be no change in economic relations "for now". But yesterday, Mr Erdogan, speaking to reporters in Ankara, said: "Trade relations, military relations, defence industry - these we will suspend. These will be completely frozen and that process will be followed also by very different sanctions."
He added that the steps to come will be a "plan C" to the "plan B" that had already been announced.
Turkey is Israel's biggest regional trade partner and sixth-biggest trade partner overall, with imports and exports last year rising by some 26 per cent from 2009 to $US3.1bn, official Israeli figures show. Israeli exports are mainly focused on the chemical and oil refinery industries as well as metals and machinery.
Despite Mr Erdogan's comments, it was not clear whether defence industry deals would indeed be suspended. Amos Gilad, a top Israeli defence ministry official, told an Israeli radio station yesterday that Israel's military attaché in Ankara "was continuing his work".
Furthermore, Israeli media quoted unidentified defence industry executives who said Turkey, seeking to bolster its military might against Kurdish guerrillas, is unlikely to call off contracts including one for US$140 million for aerial search and photography systems for F16 fighter jets. The executives added that immediately after Israel's raid on the Turkish-flagged ship in May 2010, Turkey did not cancel an agreement to buy unmanned aircraft.