Turkish Prime Minister Recep Tayyip Erdogan said on Tuesday that Turkey was "totally suspending" defense industry ties with Israel, after downgrading diplomatic relations with the Jewish state.

"Trade ties, military ties, regarding defense industry ties, we are completely suspending them. This process will be followed by different measures," Erdogan told reporters in Ankara.

Open gallery view Turkish Prime Minister Recep Tayyip Erdogan, August 10, 2011. Credit: Reuters

"The Eastern Mediterranean is not a strange place to us. Aksaz and Iskenderun, these places have the power and opportunity to provide escorts," Erdogan told reporters referring to two Turkish naval bases. "Of course our ships will be seen much more frequently in those waters."

Erdogan's confirmation came just days after Ankara launched a series of penalizing measures, including the severing of military ties, against Israel over the latter's refusal to apologize for its deadly raid on a Gaza-bound aid flotilla in 2010.

Earlier Tuesday, top Israeli defense official Amos Gilad indicated that military ties with Turkey were in fact still in effect, despite Turkish declarations, saying that the "Israel's military attaché was continuing his work."

Earlier this week, Bank of Israel Governor Stanley Fischer warned against the enomic consequences of a prolonged trade rift with Turkey, saying that that the Turkish economy far surpasses Israel's and is growing extremely fast.

"[The] Turkish economy is growing at an exceptional rate," said Fischer. "They have great entrepreneurs and a European trained labor force. Turkey will be a big market in the region and a major exporter. The consequences of not having trading relations with Turkey will be expensive."

"Inter-regional trade in the Middle East is small, and it will stay small even if it opens up," said Fischer. "Our intetregional trade does not amount to very much at the moment, but it would be of benefit if it grew."