A Turkish newspaper reported on Wednesday that Turkey would halt military cooperation with Israel and would not send back an envoy, withdrawn after an Israeli commando operation to stop an aid convoy reaching Gaza.
The Turkish government has said it is working on a road map for future ties with once close ally Israel, following the May 31 operation in which nine pro-Palestinian Turkish activists were killed.
The Star newspaper's report of decisions taken at a cabinet meeting this week was based on unnamed sources. An aide to prime minister Tayyip Erdogan declined to comment on the report.
The newspaper said the Turkish government had decided against sending back its ambassador to Tel Aviv unless Israel provides a member for a UN investigation into the incident.
UN secretary-general Ban Ki-moon has proposed a full international inquiry. Israel says it is conducting its own investigation, whose panel will include two foreign observers.
"We took a series of decisions covering military, diplomatic and political pressure and measures," The Star quoted the sources as saying.
It also reported that military deals, including plane and tank modernisation and missile projects and which the paper said were worth $7.5 billion, were to be frozen.
Military cooperation, including joint exercises and pilot training, would also be halted, as would intelligence sharing, the Star said.
It said the sanctions against Israel would be introduced gradually.
Turkey wants the United Nations to control an inquiry into the events that led to the killing of the activists aboard the Turkish-flagged Mavi Marmara while it was in international waters. Turkey doubts the impartiality of the Israeli probe.
Israel says its soldiers opened fire after a boarding party came under attack from activists armed with knives and clubs, and says its blockade of Gaza is needed to choke off the supply of arms to Hamas Islamists running the enclave.
Turkey's Erdogan has emerged as a hero among Muslims in the Middle East for bringing international attention to the conditions of 1.5 million Palestinians in Gaza. He has called for an immediate end to the Israeli blockade.
The Turkish government withdrew its ambassador, and cancelled plans for three joint military exercises immediately after the storming of the aid vessel. There has been widespread public outrage in Turkey over Israel's actions.
Turkey and Israel forged a strategic partnership in the 1990s, but relations between them came under increasing strain from last year due to Erdogan's repeated fierce criticism of Israeli policy towards Palestinians.
The United States would like to see the two allies mend fences as a breakdown of their relationship could harm US strategy in the Middle East.
