The Palmer panel offered a way around the impasse. It recognized Israel's right to impose and enforce a naval blockade on Gaza in order to prevent weapons from reaching Hamas - which has rocketed Israeli towns and cities. But the panel sharply criticized the raid, calling the military action "excessive and unreasonable" and the loss of life unacceptable. Five of the nine were shot in the head at close range, most had multiple bullet wounds, and 55 were wounded.
As the panel makes clear, Israel had a legal right to search the ship, but made a bloody mess of it. In private, knowledgeable Israelis concede that the raid was ill-conceived and poorly conducted. An apology was definitely warranted, but Israel insisted its acts were justified in the name of self-defense.
So the panel provided a formula under which Israel could apologize for the conduct of the raid, but not the naval blockade. As of midsummer, Turkish and Israeli diplomats had concocted language that appeared acceptable to both sides.
Indeed, when I last wrote on this issue in July, Israeli diplomatic sources told me Israeli Prime Minister Benjamin Netanyahu was considering an apology for unintentional "operational mistakes" during the raid. Defense Minister Ehud Barak endorsed this idea because he believed the Israeli-Turkish relationship was strategically vital.
But on Sunday, after weeks of dithering, and after the report's contents were leaked, Netanyahu said Israel "need not apologize." Now Turkey has expelled the Israeli ambassador and promised more tough measures against Israel.
"Diplomats had agreed on a formula, but the politicians rejected it," says Alon Liel, a former Israeli ambassador to Turkey; he believes an apology should have been issued. Netanyahu apparently bowed to objections by his hawkish foreign minister, Avigdor Lieberman, who vehemently lobbied against saying sorry. Or, perhaps, the Israeli prime minister got cold feet.
"I think this was a mistake," Liel said. "Israeli-Turkish relations are entering a new era. Turkey will become a hostile country and will be active against Israeli interests in the Middle East." The Obama administration is still making efforts to paper things over, but Liel was pessimistic. "It's all over," he said. "There's no apology possible now."
Some Israelis argue that Turkey Prime Minister Recep Tayyip Erdogan wouldn't have accepted the compromise that his own diplomats had agreed on. They note that the Turkish leader now calls for an end to the naval embargo in addition to his earlier demands.
We'll never know, since Netanyahu opted not to test the Turkish leader. But we do know that the Palmer panel offered a promising way to strengthen international backing for the naval embargo and even get Turkish assent.
Here's how: The panel noted that Turkey lumps Israel's naval blockade together with its land siege of Gaza, which severely hurts civilians by excluding many vital goods. The Palmer report distinguished between the two sieges, justifying the naval blockade, but calling the land closure "unsustainable." This is spot-on: Keeping ships full of weapons out of Gaza is one thing; banning desperately needed construction materials is another.
If Israel lifted the land blockade now - with appropriate security checks of goods that enter and leave Gaza - it could more easily explain its naval blockade to the world, and to Turkey. (Had Israel loosened the Gaza closure on its own, rather than wait until international pressure forced it after the Mavi Marmara disaster, the rationale for a humanitarian aid flotilla would have been diminished.)
Again, the Palmer panel offered a formula that could have helped Israel and Turkey salvage their ties.
Instead, Israel's leaders said no, and Turkish leaders have responded with chilling rhetoric. Israel lost a crucial Muslim tie, and Turkey its vaunted ability to mediate between Arabs and Israelis.
Both countries now reject the Palmer panel's conclusions that held the key to reconciliation. Israel made a strategic mistake, and Turkey is worsening the situation. History will not treat this episode kindly: The Palmer panel's offer of a win-win has been turned into a lose-lose.
E-mail columnist Trudy Rubin