The expected reconciliation between Israel and Turkey could lead to a ground-breaking strategic energy partnership in the politically turbulent eastern Mediterranean, analysts say.

This would center on the former allies, the two most powerful non-Arab states in the Middle East, ending a three-year separation that will see Israel pumping its new-found offshore natural gas resources to Turkey via an undersea pipeline for sale in energy-hungry Europe.

But there would be a geopolitical downside: hydrocarbon wannabes Cyprus and Lebanon could find themselves hard put to market their offshore gas reserves on which they're pinning their economic future.

Even so, officials on both sides are talking about how the surprise olive branch proffered by hard-line Israeli Prime Minister Binyamin Netanyahu March 22 removed the major obstacle for the joint development of vast gas fields discovered in the eastern Mediterranean since 2009.

Netanyahu, pressed by U.S. President Barack Obama to end the rift with Turkey, formally apologized for the Israeli navy's May 31, 2010, interception of a Turkish-organized humanitarian flotilla bound for the Israeli-blockaded Gaza Strip.

Naval commandoes killed nine Turks in the action in international waters.

Turkish Prime Minister Recep Tayyip Erdogan broke off relations with Israel, demanding an apology and compensation for the victims' families.

Netanyahu stubbornly refused to concede Israel was culpable, despite an international outcry against the Jewish state that erupted when it invaded Gaza in December 2007 in a bid -- futile as it turned out -- to crush the ruling Palestinian Hamas movement there.

The confrontation between the two military heavyweights, which also dated from the Gaza incursion, was a major setback for U.S. policy in the region at a time when American influence was waning in the aftermath of the Iraq and Afghanistan wars.

The Americans have been pressing the two sides, both longtime U.S. allies, to patch up their differences amid a cascade of crises in the region, including a U.S.-Iran stand-off in the Persian Gulf and the civil war in Syria that threatens to totally destabilize the region.

The Financial Times quoted a senior Turkish official as saying the rapprochement made the idea of a gas pipeline from Israel to Turkey "a much more viable" prospect.

Turkey, with no energy resources of its own, wants to become the main east-west energy hub between Russia and Europe.

Indeed, Israeli sources say the economic gains that restoring relations with Ankara are likely to bring were central to Netanyahu's decision to end the rift.

Israel has two major deep-water gas fields off its northern coast that contain a total of at least 25 trillion-27 trillion cubic feet of gas.

Production from the Tamar field, the first discovery in 2009, began Saturday. It holds at least 8 tcf. The larger Leviathan field further west contains some 16 tcf. These finds will transform the economy of Israel, which has had to import all its fuel.

The Financial Times reported that the main investors in Israel, Nobel Energy Inc. of Houston, and its main local partner, Delek Energy, "have in recent weeks sounded out possible customers in energy-hungry Turkey, but until now the countries' rift appeared to preclude progress."

Oxford Analytica observed that Erdogan "does not like Israel but Turkey's national interest takes precedence over his personal antipathy."

By reconciling with Israel, he hopes Washington will drop its objections to his burgeoning links with Iraq's semiautonomous Kurdish zone.

U.S. oil majors there are poised to develop the enclave's reserves of 45 billion barrels of crude despite Baghdad's bitter opposition and Washington's fears that will mean the breakup of the Iraqi state the Americans established after the 2003 invasion.

None of this will benefit Cyprus, gripped by a toxic economic crisis even though the island's sitting on large gas fields, or Lebanon, which is moving toward issuing licenses to drill for its estimated reserves of 25 tcf.

Israel and Cyprus had talked of jointly exporting to Europe via Greece but it's financially on its knees as well.

Whether Cyprus and Lebanon find hooking into that pipeline to be their only feasible export plan remains to be seen.