By Nick Tattersall, Jack Stubbs and Jeffrey Heller
ISTANBUL/MOSCOW/JERUSALEM (Reuters) - Turkey announced the restoration of diplomatic ties with Israel on Monday after a six-year rupture and expressed regret to Russia over the downing of a warplane, seeking to mend strained alliances and ease a sense of isolation on the world stage.
The deal with Israel after years of negotiation was a rare rapprochement in the divided Middle East, driven by the prospect of lucrative Mediterranean gas deals as well as mutual fears over growing security risks.
"With this agreement, economic relations will start to improve," Turkish President Tayyip Erdogan said of the deal with Israel, echoing Israeli Prime Minister Benjamin Netanyahu, who said it would have "immense implications" for Israel's economy.
In his comments following a dinner to break the fast in the holy month of Ramadan, Erdogan also said Turkey aimed for a quick normalization of ties with Moscow.
"I believe we will normalize our relations with Russia rapidly by ending the existing situation which is not in the interest of both sides," he said.
The Kremlin earlier said Erdogan had apologized to Vladimir Putin over last year's shooting down of a Russian air force jet by Turkey's military, opening the way for Russia to lift economic sanctions.
A spokesman for Erdogan, Ibrahim Kalin, confirmed a letter was sent to Putin, though he did not refer explicitly to an apology, something Turkish officials had long ruled out. Kalin said Erdogan had expressed regret and asked the family of the pilot to "excuse us."
The moves come as a new Turkish government packed with Erdogan allies re-evaluates its foreign policy. Ankara has seen relations strained not only with Israel and Russia, but also with the United States and European Union in recent months.
Turkey's worst nightmare in Syria has come true: Russian support has enabled its enemy President Bashar al-Assad to remain in power, while Kurdish militia fighters have benefited from U.S. support as they battle Islamic State, bolstering their position in territory adjacent to the Turkish border.
Days after taking office last month, new Prime Minister Binali Yildirim said Turkey needed to "increase its friends and decrease its enemies", in what appeared a tacit admission that his predecessor's policies had left the NATO member isolated.
"It seems to me Turkey is undertaking a reprioritization of foreign policy," said Brenda Shaffer, a visiting professor at Georgetown University and a fellow at the Atlantic Council.
"In both of these cases, it is practical realpolitik overriding ideological considerations. There were never any bilateral disputes between Turkey and Israel, just the opposite, there were only mutual interests. The same is true for Russia."
Turkey and Israel will exchange ambassadors as soon as possible, Yildirim said on Monday.
NETANYAHU SEES ECONOMIC DIVIDEND
Relations between Israel and what was once its principle Muslim ally crumbled after Israeli marines stormed an activist ship in May 2010 to enforce a naval blockade of the Hamas-run Gaza Strip and killed 10 Turks on board.
The mending in relations with Israel raises the prospect of eventual cooperation to exploit natural gas reserves worth hundreds of billions of dollars under the eastern Mediterranean, officials have said. Netanyahu said it opened the way for possible Israeli gas supplies to Europe via Turkey.
Speaking after meeting U.S. Secretary of State John Kerry in Rome, Netanyahu said the agreement was an important step.
"It has also immense implications for the Israeli economy, and I use that word advisedly," he told reporters.
Both Kerry and U.N. Secretary-General Ban Ki-moon welcomed the deal. Kerry said: "We are obviously pleased in the administration. This is a step we wanted to see happen."
Netanyahu made clear the naval blockade of Gaza, which Ankara had wanted lifted, would remain in force, although humanitarian aid could continue to be transferred to Gaza via Israeli ports.
"This is a supreme security interest of ours. I was not willing to compromise on it. This interest is essential to prevent the force-buildup by Hamas and it remains as has been and is," Netanyahu said.
But Yildirim said the "wholesale" blockade of Gaza was largely lifted under the deal, enabling Turkey to deliver humanitarian aid and other non-military products.
A first shipment of 10,000 tonnes will be sent next Friday, he said, and work would begin immediately to tackle Gaza's water and power supply crisis.
Erdogan said he had been in touch with Palestinian President Mahmoud Abbas about the deal.
"We have never accepted and we will never accept any conditions or impositions that will harm the rights of Palestinians," Erdogan said.
Hamas in Gaza issued a statement thanking Turkey and Erdogan for their support "to help our people ... and to alleviate the blockade" and said it hoped Turkish efforts would achieve its complete lifting and would force Israel "to stop its attacks against our people and our land."
Yildirim said that Israel and Turkey would exchange ambassadors as soon as possible.
In a television interview late on Monday, he suggested the resetting of ties could also extend to Egypt. "There isn't any obstacle to improve our economic relations with Egypt. Minister-level visits may start," he said.
HOPES FOR END TO RUSSIAN SANCTIONS
A resolution in the dispute with Russia could ease some of the diplomatic tensions around the Syria conflict. Moscow supports Assad, while Ankara backs the rebels who are trying to oust him.
The Russian jet was shot down, with the loss of the pilot, in November while it took part in the Kremlin's military campaign in Syria. Ankara said it acted lawfully because the plane entered Turkish air space; Moscow denied that happened.
The Kremlin responded to the downing of the plane by slapping trade restrictions on Ankara, including freezing work on a pipeline to ship Russian gas to Europe via Turkey and advising Russian tourists to avoid Turkish resorts.
Putin had said those measures would only be lifted if Erdogan personally issued an apology. There was no word from the Russian authorities on Monday on ending the sanctions.
"For the peace of the region, I believe in the importance of an effort to improve strategic relations that we have built with this close neighbor," Erdogan said about Russia.
The Kremlin statement said Erdogan had expressed his readiness to do everything necessary to restore the traditionally friendly relations between Turkey and Russia, and also to jointly fight terrorism.
After the Kremlin revealed the existence of Erdogan's letter, the Turkish lira firmed to 2.9330 against the U.S. dollar <TRYTOM=D3> from 2.9430 beforehand. It later lost some of the gains to trade at 2.9350 at 1638 GMT.
(Additional reporting by Ayla Jean Yackley in Istanbul, Ercan Gurses and Tulay Karadeniz in Ankara, Warren Strobel in Rome, Dan Williams and Ori Lewis in Jerusalem, Nidal al-Mughrabi in Gaza, Christian Lowe in Moscow and; Louis Charbonneau at the U.N.; Writing by Nick Tattersall and David Dolan; Editing by Peter Graff, Hugh Lawson, Toni Reinhold)