The Turkey-Israel relationship is not out of the woods just yet.

After some positive signs in recent weeks that the once close allies were moving to repair the rift that ripped wide open last year after nine Turks were killed by Israeli forces in a confrontation on a Gaza-bound flotilla of ships, Turkey’s prime minister renewed his hard line on Israel.

"Normalization of relations between the two countries is unthinkable,” Recep Tayyip Erdogan said July 8 in a speech to the Turkish Parliament, “unless Israel apologizes for this illegal act, which is against international law and values, pays compensation to the relatives of those who lost their lives in this atrocious event and lifts the embargo on Gaza.”

Israel says it will not apologize for the incident, which took place aboard the Turkish-flagged ship Mavi Marmara on May 31, 2010, but says it is willing to express regret for the loss of life. It is also willing to compensate the families, but on the condition that the payments preclude future civil claims against the individual soldiers involved.

For most of the past decade, Israel and Turkey, two major non-Arab regional players, enjoyed a very close relationship that was often described as "strategic." Israeli fighter planes trained over Turkish airspace, the two countries held joint naval rescue exercises and Israel provided Turkey with anti-terrorist equipment and know-how. In 2007 and 2008, Erdogan even mediated indirect Israeli-Syrian peace overtures.

But the Islamist prime minister, who came to power in 2003, has been consistently critical of Israeli policies toward the Palestinians, often using harsh language to vent his feelings.

Things came to a head with the 2009 Gaza War, and relations between the two countries since then have cooled. The Mavi Marmara affair exacerbated the already existing rift, with Erdogan demanding an apology from Israel and Israel accusing the Turkish government of encouraging the Turkish radicals behind the maritime challenge to its naval blockade of the Gaza Strip.

At the time, Israeli analysts saw in Turkey's abandonment of Israel part of a wider regional foreign policy shift. Devised by Turkish Foreign Minister Ahmet Davutoglu and dubbed "zero problems," it entailed a move toward closer ties with the Iran-Syria axis at Israel's expense.

Ironically, the U.N. commission investigating the Mavi Marmara affair provided the platform for a possible Israel-Turkey reconciliation. Headed by former New Zealand Prime Minister Geoffrey Palmer and co-chaired by former Colombian President Alvar Uribe, it included representatives from Israel and Turkey.

According to unofficial reports, the Palmer Commission found that Israel's blockade of Gaza and its interception of the Turkish vessel on the high seas both were legal, but that the commandos used excessive force in taking over the Mavi Marmara. The report also allegedly censured Turkey for encouraging the activists.

Unhappy with the text, the Turks allegedly asked that the official publication of the findings be deferred to enable the Israeli and Turkish representatives on the commission -- former senior Foreign Ministry officials Yosef Ciechanover for Israel and Ozdem Sanberk for Turkey -- to hammer out a compromise.

But Ciechanover and Sanberk have been working for the past several months on something much wider: a compromise that will allow the full normalization of Israel-Turkey relations. With the deferment, they now have until July 27 to get the job done. Apparently they are looking for a formulation that in Turkish will sound like an Israeli apology and in Hebrew like an Israeli expression of regret for loss of life.

Insiders say this is why the U.N. report on the incident has been delayed.

Short of an apology, official Israel has made every effort to effect a reconciliation. After Erdogan's re-election on June 12, Prime Minister Benjamin Netanyahu sent a conciliatory message.

"My government will be happy to work with the new Turkish government on finding a solution to all outstanding issues between our countries in the hope of re-establishing our cooperation and renewing the spirit of friendship which has characterized the relations between our peoples for many generations," Netanyahu wrote.

There were even rumors that Israel had entrusted Erdogan with a mediation mission for the release of Gilad Shalit, the Israeli soldier believed to be held captive in Gaza since June 2006.

The Turks also made conciliatory gestures. A few weeks before this year's planned flotilla to challenge the Gaza blockade, they canceled the participation of the Mavi Marmara. Their readiness to work for a compromise within the context of the Palmer Commission was another of sign of willingness to cut a deal.

But both sides had their hard-liners -- Erdogan on the Turkish side and Foreign Minister Avigdor Lieberman on the Israeli.

"Turkey wants to give the impression that it can dictate terms and that we'll accept them as if it were a superpower," Lieberman grumbled at an early July meeting of the Knesset's Foreign Affairs and Defense Committee. "As far as we are concerned, there is no reason to apologize."

Lieberman was backed up by Tel Aviv University's Ehud Toledano, an expert on Turkey, who argued that there was no need to sweet talk the Turks because Israel had little to gain from a restoration of ties. Writing in Haaretz, Toledano claimed that Erdogan had eroded the Turkish army's independence and taken control of MIT, the Turkish intelligence service, and thus the damage to Israel's strategic ties with Turkey was irreversible.

In other words, reconciliation would not change much.

During the estrangement from Turkey, Israel has drawn closer to Greece, Turkey’s traditional rival.

The relationship paid off in early July when Greek authorities delayed this year's planned Gaza flotilla. When U.S. and Canadian vessels slipped away from Greek shores, Greek frogmen forced them back.

Israel’s newfound closeness with Greece also is a message to Turkey that Israel has other options in the eastern Mediterranean. Israeli tourists, too, have been boycotting Turkey and instead going to the Greek islands in droves. This week, Greece’s president visited Israel.

Yet while the annual volume of trade between Israel and Greece has increased dramatically to about $140 million, it is nowhere that of Israel and Turkey, which at approximately $3.5 billion remains largely unaffected, except for the military aspect.

For Israel, there is no way Greece can fully replace Turkey.

Still, the Greek connection is one reason that Turkey is clearly rethinking its damaged relationship with Israel -- Erdogan's latest outburst notwithstanding.

A more important reason, experts say, is the impact on Turkey of the Arab Spring. Syria has proven to be an especially problematic and unreliable ally for Turkey. Turkish leaders have criticized Syrian President Bashar Assad's cruel methods of repression, and more than 12,000 Syrian refugees have fled Syria for Turkey.

The Turks, Israeli experts say, are finding that to effectively play the dominant regional role they seek, they need Israel.

Whether all this will lead to a reconciliation is too early to say. Things should become clearer by the end of the month, when the Palmer Commission's report on last year’s flotilla incident is due.