So far, despite the ongoing thaw in diplomatic relations, there has been no concrete sign that Turkey's defense establishment will lift a de facto ban on Israeli arms imports.
"We don't expect an immediate return to the good old days," a senior official of one Israeli defense company told Defense News, a U.S. weekly.
"But we see no reason why cooperation in key defense systems should not resume in line with normalization of political relations."
If that occurs, it will be a major boost for Israel's defense sector at a time when its facing a slump in domestic orders because of cuts in defense spending and a possible reduction in U.S. military aid amid belt-tightening measures.
Turkey froze its relations with Israel, including considerable defense contracts, to protest the Israeli navy's May 31, 2010, interception of a Turkish-organized flotilla carrying humanitarian aid for Palestinians in the Israeli-blockaded Gaza Strip.
Nine Turks where killed when Israeli naval commandos stormed the lead ship, a Turkish vessel named the Mavi Marmara, in international waters in the eastern Mediterranean.
Relations had been under heavy strain since December 2008, when Turkey's Islamist prime minister, Recep Tayyip Erdogan, bitterly protested Israel's invasion of the Gaza Strip to crush the militant Hamas movement.
The Mavi Marmara violence transformed the diplomatic rift into an incendiary confrontation between the two most powerful non-Arab states in the region, both important U.S, allies.
Amid an international uproar against Israel for the Gaza invasion and the Mavi Maramara incident, Erdogan demanded an Israeli apology and compensation for the victims' families.
Israel's hard-line prime minister, Binyamin Netanyahu, refused, claiming Israelis forces acted in self-defense.
Erdogan froze relations, terminating at a stroke several major defense contracts with Israel worth billions of dollars.
That also effectively shut down Israel's strategic military and intelligence alliance with Turkey that was signed in 1996, formalizing a discreet arrangement that dated back to the 1940s.
After the 1996 defense pact, Turkey became a major export market for Israel's defense firms.
Israel Military Industries upgraded 170 U.S.-built M-60A1 tanks for the Turkish army to the standard of the Israeli army's Merkava III tank in a $700 million deal.
Israel Aerospace Industries, flagship of Israel's defense sector, provided advanced unmanned aerial vehicles, which the Turks used for surveillance operations in their war with Kurdish separatists.
IAI also upgraded 54 Turkish F-4 Phantom fighters.
Elbit Systems, Israel's leading military electronics company, sold ground stations used to operate the Israeli UAVs as well as intelligence-gathering systems.
The breakthrough in ending that rift, which was a serious setback for U.S. policy in the region, came March 22 and was brokered by U.S. President Barack Obama during a three-day visit to Israel.
At a last-minute meeting with Netanyahu in a trailer beside Air Force One on the tarmac at Ben Gurion Airport as Obama prepared to leave, he convinced the Israeli leader to telephone Erdogan and formally apologize for 2010 killings.
Officials on both sides have disclosed that contacts between the two governments to find a settlement have been going on for some months.
Indeed, there was a sign in February that a defense-related thaw was in the works.
Israel's Elta Systems, apparently under U.S. pressure, supplied Turkey with advanced electronic warfare units to equip four AWACS aircraft the Boeing Co. is building for the Turkish air force.
Elta, a subsidiary of state-owned IAI, had committed to the deal under a $200 million contract with Boeing in 2002.
As things stand right now following Obama's diplomatic coup, it's not clear whether a reconciliation will mean the revival of old defense contracts or open the way for new ones.
But it's likely that Erdogan's using that to secure an agreement with Netanyahu that will be politically acceptable.
Turkish procurement officials are maintaining a cautious approach until the two sides have agreed on terms.
"We must wait and see if the detente will lead to full normalizations," a Turkish official told Defense News.
But Obama clearly wants the U.S. allies to reconcile to bolster U.S. influence in a strategic and highly volatile region where a confrontation with Iran is growing.
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