Relations between Turkey and Israel have deteriorated sharply, despite the diplomatic efforts of the Obama administration.

The immediate source of the tensions is the publication of a United Nations report into Israel’s attack on the Turkish-flagged Mavi Marmara, part of a Gaza-bound aid flotilla in May 2010. However, this is only the focus for hostilities generated by a wider conflict over regional hegemony in the Middle East.

The vessel was in international waters when Israeli commandos raided it, murdering eight Turkish citizens and a Turkish American. Several other civilians were seriously injured.

Ever since the Mavi Marmara killings, the Turkish government has demanded that Israel issue an official apology and pay compensation—both of which Israel has refused to do.

The UN report was—as expected—a whitewash. It endorsed the Israeli rampage on the Mavi Marmara and provided UN approval for further actions by Israel against Gaza. As a sop to Turkey, the report complained that the Israel Defence Forces had used “excessive force”, calling on Israel to make “an appropriate statement of regret” and “offer payment for the benefit of the deceased and injured victims and their families”.

When Israel again refused to back down, Ankara was furious. It had offered various olive branches before the UN published its report, including stopping Turkish NGOs from participating in further aid flotillas to Gaza. Now, however, Prime Minister Recep Tayyip Erdogan has launched a diplomatic offensive against Israel, threatening to send Turkish destroyers to escort future aid convoys trying to break the Israeli blockade of Gaza.

Ankara has expelled Israel’s ambassador to Turkey, downgraded diplomatic ties to the lowest possible level, suspended military ties and terminated defence contracts with Israel. Officials at the Istanbul airport detained Israeli passengers 90 minutes for questioning.

Erdogan has said that Turkey would increase its naval presence in the eastern Mediterranean. Speaking of future aid flotillas bound for Gaza, he stated: “From now on, we will not let these ships be attacked by Israel, as what happened with the Freedom Flotilla.”

Hürriyet Daily News, the Turkish daily, quoted a Turkish official as saying that the eastern Mediterranean would no longer be a place where Israeli naval forces can freely exercise their “bullying” practices against civilian vessels.

An indication of the broader tensions fuelling this conflict arose when Erdogan challenged a plan by Cyprus to explore gas fields in the Eastern Mediterranean, bordering Israeli waters. This intervention sparked fears that the nearly 40-year-long conflict over Cyprus could reignite and coalesce with the Turkish-Israeli conflict.

Ankara says that the energy resources also belong to northern Cyprus—which Turkey has occupied since 1974—and has warned that Turkey will intervene militarily if drilling goes ahead without resolving the conflict.

Last month, Erato Kozakou-Marcoullis, Cyprus’ foreign minister, went to Tel Aviv to seek cooperation on energy exploration. In a statement issued after the meeting, Israeli Prime Minister Benyamin Netanyahu said that Israel and Cyprus had “overlapping interests.” He added that they had discussed “the possible expansion of energy cooperation given that both countries have been blessed with natural gas reserves in their maritime economic zones.”

Erdogan’s response was blunt. “You know that Israel has begun to declare that it has the right to act in exclusive economic areas in the Mediterranean,” he said. “You will see that it will not be the owner of this right, because Turkey, as a guarantor of the Turkish republic of north Cyprus, has taken steps in the area, and it will be decisive and holding fast to the right to monitor international waters in the east Mediterranean.”

This is a dramatic political reversal. Israel-Cyprus ties have not been particularly warm, whereas Turkey was the first country in the region to recognise Israel in 1949. Since then, Turkey’s economic and defence ties to Israel have become increasingly close, particularly from the mid-1990s, when Israel signed lucrative agreements to modernise Turkey’s air force and supply it with surface-to-air missiles. More recently, Israel upgraded Turkey’s tanks and supplied electronic military systems and drones for use against Kurdish militants, while Ankara allowed Israel’s air force to conduct exercises over Turkey’s Konya province.

Turkey has a population 10 times that of Israel and armed forces of 650,000, the second largest in NATO after the United States. It has conducted numerous joint exercises with Israel and the US, most notably the Anatolian Eagle drills. Israel’s warplanes even felt free to fly over Turkish airspace when attacking a military site in Syria, which Tel Aviv claimed was a nuclear plant, in 2007.

However, Ankara’s trade links with its neighbours—Iran, Iraq, Syria, Lebanon and Jordan—have grown, making Turkey a regional economic powerhouse. It now is seeking to exert diplomatic and political influence in line with this new-found economic weight, and become increasingly assertive in pursuit of its strategic interests in the region. This has strained relations with both Israel and Egypt.

Though it has no energy resources of its own, Turkey occupies a key geographic position near the energy-rich Caucasus and Middle East, hosting numerous pipelines carrying oil and gas to Europe. It has signed trade agreements with its neighbours and scrapped visa requirements for travel.

Relations with Israel became strained, particularly after Israel’s 2008-09 assault on Gaza. Turkey’s ruling Islamist Justice and Development Party (AKP) registered its support for Hamas and expelled Israel from the Anatolian Eagle drill.

A significant domestic factor in creating cooler relations with Israel has been Erdogan’s desire to reduce the power of Turkey’s generals—traditionally close to the US and opposed to the Islamists. The AKP is keen to have closer relations with the Muslim and Arab world.

Tel Aviv has felt increasingly isolated since the revolutionary uprising in Egypt that led to Hosni Mubarak’s ouster in February. Netanyahu issued a statement saying, “Israel is not interested in a crisis with Turkey and would like to see relations between the two countries improve… We respect the Turkish people and their legacy. We support improving relations.”

However, Netanyahu refused to back down over the Mavi Marmara incident. He has ordered his cabinet to refrain from commenting on the situation—apparently in a bid to silence his foreign secretary, Avigdor Lieberman of the far-right Yisrael Beiteinu party, who said that he was considering retaliatory measures against Turkey.

While Erdogan has said that he is considering further measures, the severing of ties between the two countries does not as yet include economic relations, worth $3.5 billion to $4 billion a year, which would have a massive impact on Israel’s economy.

The US is trying to stop the relations between two key allies in the region from deteriorating further. It had put pressure on the UN investigating committee to come up with a report as favourable to Israel as possible, but then delayed the publication of the report for months, ostensibly to try and wring some sort of apology out of Israel.

State Department spokesperson Victoria Nuland said that the US had urged the leaders of both countries to avoid a war of words. Nuland said: “We would like to see both sides cool it and get back to a place where they can have a productive relationship”.

She told reporters that Secretary of State Hillary Clinton and the US Ambassador in Ankara had held a lengthy meeting with Turkish Foreign Minister Ahmet Davutoglu to try to defuse the tensions.

Turkey is a key component of Washington’s plans for regime-change in Syria. Ankara might consider invading Syria to unseat Bashar al-Assad, with or on behalf of NATO and the Western powers, and with money from the Sunni monarchies in the Gulf.

Ankara for its part does not want to antagonise Washington. It has agreed to host the proposed NATO nuclear shield, a project aimed against Iran despite Ankara’s closer relations with Tehran in recent years and the $10 billion annual trade between the two countries.