Turkey and Israel hold talks on mending fences

One of six ships bound for Gaza is seen in the Mediterranean Sea, May 31, 2010.

ISTANBUL (Reuters) - Turkey told Israel at face-to-face talks in Brussels this week what it must do to mend ties damaged after Israeli commandos stormed a Gaza aid ship nearly a month ago, Turkey's Foreign Minister said on Thursday.

Once Israel's closest Muslim ally, Turkey has said it wants Israel to apologize, pay compensation, agree to a U.N. inquiry into the incident and lift the blockade of 1.6 million Palestinians living in the Gaza Strip.

"We will continue to pursue the issue," said Foreign Minister Ahmet Davutoglu, referring to the conditions Ankara has set.

Davutoglu met Israeli Trade and Industry Minister Benjamin Ben-Eliezer on Wednesday.

"We gave voice to our demands. We have brought our demands to the agenda at every opportunity," he said in parliament.

Nine Turkish pro-Palestinian activists were killed when Israeli commandos stormed the Turkish-flagged ship Mavi Marmara on May 31 as part of an operation to stop a relief aid flotilla headed for Israeli-blockaded Gaza.

Turkey withdrew its ambassador to Israel, canceled joint military operations and barred Israeli military aircraft from Turkish airspace after the incident.

The United States wants Israel and Turkey, whose earlier friendship had benefited U.S. policy in the Middle East, to patch up the dispute.

U.S. President Barack Obama met Turkish Prime Minister Tayyip Erdogan in Toronto on Sunday and is due to meet Israel's Benjamin Netanyahu in Washington on July 6.

Israel has opened its own inquiry into what happened when its marines stormed the Mavi Marmara, but has maintained that they opened fire only after a boarding party was attacked by rights activists wielding clubs and knives.

Israel says the Gaza blockade is needed to choke off the supply of arms to Hamas Islamists who rule the enclave.

The U.N. Security Council and a host of Muslim countries condemned the Israeli action.

Relations between Israel and Turkey have been on a downward spiral since Prime Minister Erdogan spoke out forcefully against an Israeli offensive in Gaza at the end of 2008.

The two countries had forged a friendship in the 1990s largely based on military cooperation and intelligence sharing, though trade also prospered.

Turkey has improved relations with neighbors such as Iran and Syria in recent years and Erdogan became a popular figure among Muslim countries for championing the Palestinian cause.

(Additional reporting by Tulay Karadeniz in Ankara and the Jerusalem bureau; editing by Matthew Jones)