An agreement was almost reached between Israel and Turkey over resolving differences and outstanding claims over last year's flotilla incident on board the Mavi Marmara, in which nine Turkish nationals were killed, but the deal fell apart two weeks ago, much to the chagrin of Washington, Army Radio reported on Thursday.

According to the report, Prime Minister Binyamin Netanyahu agreed to apologize to Turkey for "tactical mistakes" made during the operation to take control of the Marmara and to pay restitution to the families of those killed. In return, Turkey would agree to not pursue any additional claims against either Israel or the IDF soldiers who partook in the raid.

Netanyahu was reportedly hesitant to go through with the deal out of fear that Foreign Minister Avigdor Lieberman would object to it and pull his Israel Beiteinu party from the coalition, effectively toppling the government. The United States government, however, determined to see a reconciliation agreement reached between Israel and Turkey, placed pressure on the foreign minister to get him to agree to the language of the deal.

The failed reconciliation was reportedly the main point of conversation between Netanyahu and US President Barack Obama in a late-night phone call on Wednesday. According to the Army Radio report, Obama expressed his disappointment in the failure to reach a deal as Washington sees reconciliation with Anakara as key to placing a wedge between Iran and Turkey.

The White House, in a statement, said that the two leaders consulted "on regional issues and efforts to achieve peace in the Middle East."

The statement added that Netanyahu expressed appreciation for US support for Israel's security, in particular its support for the Iron Dome rocket and mortar defense system.

Homeland Security Minister Matan Vilna'i, responding to the report, told Army Radio Thursday morning, "In the past, I almost reached an agreement with the Turkish foreign minister.

Vilna'i said that payments to the families of those killed in the Marmara raid were not an issue, pointing instead to the specific language of any apology issued by Jerusalem. "The Turks wanted [us] to use the word 'apologize', whereas we preferred using the word 'regret,'" the minister said in the interview.

"What was most important to me was that IDF soldiers - to ensure that also after they are discharged, are not exposed to [criminal] complaints," Vilna'i said, adding that Defense Minister Ehud Barak agreed with his position. "We decided that we would apologize for operational mistakes that we made - mistakes that we already acknowledged in the Turkel Commission."

The main obstacle to reaching a deal, he added, was Lieberman. "He didn't agree with us" and chipped away at the document.

Vilna'i, however, said that he wasn't personally involved in the most recent developments. "My opinions and my stance were clear," he noted.

He added, "I think that Turkey is an important friend to Israel, and we need to resolve the conflict."

Lieberman, speaking with Israel Radio, explained his opposition to apologizing to Turkey later Thursday.

"In the Middle East, you can't be weak," Lieberman said. He added that reconciliation with Turkey was not dependent only on an apology, saying that Turkish Prime Minister Tayyip Recep Erdogan is also demanding that Israel lift its naval blockade on the Gaza Strip.