The diplomatic crisis with Ankara intensified on Thursday when the Defense Ministry decided not to renew an export license for Elbit Systems and Israel Aerospace Industries to sell advanced intelligence systems to the Turkish Air Force.

Defense officials said Israel was working to improve ties with Ankara but that the ministry was “responsible for every product that receives an export license” and that it could not currently permit the delivery of the intelligence- gathering systems to Turkey.

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“This has to do strictly with this system and should not impact the overall ties between the countries,” an official said.

The $140 million deal, signed in 2009, was for the sale of the advanced infrared Lorop camera and associated equipment. Developed by Elbit subsidiary El-Op, the camera is installed in a pod which can be carried on combat aircraft. The systems were supposed to be delivered to Turkey in the coming months.

Both IAI and Elbit are in talks with Defense Ministry director- general Udi Shani about the expected economic implications and the possibility that they will be exposed to Turkish lawsuits for reneging on the contract.

Elbit revealed the Defense Ministry decision in a statement to the Tel Aviv Stock Exchange, saying that the company was in talks with Shani about receiving compensation for the refusal to renew the export license.

“At the present time, there is not an estimate of the amount of the damages that may result from the nonrenewal of the export authorizations. Such damages may have a material impact on the company’s financial results,” Elbit said.

Israel’s ties with Turkey hit rock-bottom earlier this year, when Ankara expelled the Israeli ambassador after the United Nations published its report on the 2010 flotilla incident. The report justified Israel’s sea blockade over the Gaza Strip. Since the flotilla, diplomatic and military ties have been at a bare minimum.

In response to Elbit’s statement, the Defense Ministry stated: “The Defense Ministry is holding regular discussions with all of the relevant authorities and decisions are made on a professional basis and in line with security and diplomatic considerations.”

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