Turkey and Israel boosted their political, military and defense relations to a strategic level in the late 1990s

The Turkish and Israeli companies, two years behind schedule in an effort to supply 10 Heron UAVs to the Turkish military, will pay the government millions of dollars to keep the contract, Muharrem Dortkasli, director general of the Turkish Aerospace Industries (TAI) said Dec. 22.

The deal is an amicable solution to the dispute between Turkey and Israel, whose close political relationship deteriorated in 2009.

"The Israeli side would pay between $10 and $15 million, and they have agreed to this," said one Turkish defense official familiar with the program. "The TAI's share would be much less."

TAI is the Heron program's prime contractor, although most of the job is being done by the IAI-Elbit team.

In 2005, Israel Aerospace Industries (IAI) and Elbit won a nearly $190 million contract to produce the Herons for the Turkish military, but technical difficulties dogged the program from the start. The Herons have failed to pass a number of performance tests this year.

In late November, Turkey's National Defense Minister Vecdi Gonul warned that the contract might be cancelled, unless Israel delivered working systems within 50 days - a deadline of early January.

Dortkasli told reporters that a a "certain point of reconciliation" had been reached by the Turkish defense procurement office, the Israeli partnership and his company. Dortkasli said he believed that the accord would be formally announced within a few days, and then efforts for final acceptance tests for the Herons would begin.

"We expect to deliver the systems in the first and the second quarters of next year," he said.

Dortkasli said,"We will pay a just amount to the Turkish state. We will share this with the Israeli side."

He said the penalty share for IAI and Elbit would be directly proportional to their work share in the whole program.

A source said that the Israelis were expected to pay their share in the penalty in the form of services and equipment, rather than money.

Turkey and Israel boosted their political, military and defense relations to a strategic level in the late 1990s, including the sale to the Turkish military of Israeli arms systems worth billions of dollars. But this relationship was damaged early this year when Ankara accused the Jewish state of atrocities during a military offensive against Palestinians in Gaza in January. Prime Minister Recep Tayyip Erdogan repeatedly and strongly criticized Israel throughout the year, despite U.S. efforts to reconcile the two sides.

Israeli Defense Minister Ehud Barak is expected to visit Ankara in January for talks with his Turkish opposite number Vecdi Gonul. This visit is expected to be the strongest effort to break the ice between Turkey and Israel.