Syria says to hold military exercises with Turkey

* Turkey says cancelling exercises with Israel not political

* Syria welcomes Ankara's decision

ALEPPO, Syria, Oct 13 (Reuters) - Syria said on Tuesday it would hold military exercises with Turkey, shortly after Turkey cancelled manoeuvres with Israel.

Ankara's decision, which was commended by Syria, revived fears of cooler relations between Israel and NATO member Turkey.

"We held our first joint land military exercise (with Turkey) last spring. And today we have agreed to do a more comprehensive, a bigger one," said Syrian Defence Minister Ali Habib, speaking at a news conference.

Turkey, a secular Muslim country, has been a key ally of Israel, but ties have been strained over Turkish Prime Minister Tayyip Erdogan's harsh criticism of Israel's three-week offensive in the Hamas-ruled Gaza Strip in December and January.

Both Turkey and Israel on Monday denied the cancellation of air force exercises scheduled for this week posed any threat to their long-standing bilateral ties and strategic interests.

But Syrian Foreign Minister Walid al-Moualem commended Ankara cancelling of the exercises, in comments made during a high-level meeting of Turkish and Syrian ministers.

"We extremely welcome that decision. This decision is based on Turkey's approach towards Israel and reflects the way Turkey regards the Israeli attack in Gaza," Moualem told reporters in the Syrian city of Aleppo, where 10 Turkish minsters met 15 Syrian ministers to discuss energy and electricity projects.

European Union candidate Turkey, under Erdogan's Islamist-rooted AK party, has deepened its ties and influence in the Middle East, expanding Ankara's foreign policy beyond its traditional Western-oriented focus and strengthening ties with countries such as Syria and Iran.

Turkey denied any political motive behind the decision to "postpone" the exercise with Israel and called on Israel to display "common sense" in their statements.

Foreign Minister Ahmet Davutoglu on Tuesday repeated Ankara's position that it had not singled out Israel as a political punishment but had decided to call off the international stage of the military exercises, which would have also included the United States, Italy and NATO.

But he told reporters in Aleppo: "Our sensitivity on Gaza, East Jerusalem and al-Aqsa mosque are there. If these sensitivities are taken into consideration the peace process would resume in the region."

A senior government source told Reuters Israel had been excluded because of the Gaza offensive, saying it would have been inappropriate to carry out military exercises right now.

Once on the brink of war over Kurdish separatist rebels, Turkey and Syria have strengthened their commercial ties and have signed a bilateral visa-free agreement.

Israel, which has enjoyed close military cooperation with Turkey as well as bilateral trade worth nearly $3 billion, has urged Ankara to consider cooling ties with Palestinian Islamists Hamas and with Iran. Erdogan is due to visit Iran this month. (Writing by Ibon Villelabeitia; Editing by Alison Williams)