ANKARA (Reuters) - Turkeys Foreign Minister has said Turkey wants to repair ties with Israel but insisted the Jewish state must first apologise and offer compensation for its deadly raid on a Gaza-bound ship. Turkey has the will to make peace with Israel, Ahmet Davutoglu told reporters, reiterating Ankaras conditions for the re-establishment of full diplomatic ties. Turkey has the will to make peace with everybody, Davutoglu said, according to state-run Anatolian. Why should Israel remain excluded? It is a country with which we had very good relations until 2008. Meanwhile, Israel on Sunday poured scorn on Turkish call to restore relations by apologising, and said Ankara should be making amends. I think the matter of an apology borders on chutzpah or beyond, Foreign Minister Avigdor Lieberman told Israeli diplomats in a speech attended by international media. If anything, we are waiting for an apology from the Turkish government, and not the other way around. Lieberman was responding to a Turkish demand that Israel apologise and offer compensation for its marines killing of nine Turks in clashes aboard the Mavi Marmara aid ship in May. The incident, following months of Turkish censure of Israeli policies towards the Palestinians, damaged relations between the Jewish state and its once-stalwart Muslim ally and NATO power. Envoys of the two countries held rapprochement talks in Geneva this month. Israeli officials say they broached a deal that would entail them expressing regret for the ship violence and paying damages to those bereaved or hurt, in return for a Turkish commitment to indemnify navy personnel against lawsuits. A formal Israeli apology would only serve to fuel such legal actions, Liebermans deputy, Danny Ayalon, has said. Lieberman and Ayalon hail from an ultranationalist party that is the often fractious junior coalition partner to Israeli Prime Minister Benjamin Netanyahus right-wing Likud. Political sources say Netanyahu sometimes excludes Lieberman from more sensitive policymaking and sent one of his confidants to team up with the Israeli diplomat handling the Geneva talks. Turkish media quoted Davutoglu, a leading figure in Prime Minister Tayyip Erdogans AK party, as casting doubt on the credibility of Israels government on Saturday. The fact that we have the will to make peace does not mean that others also have that will. Then this creates difficulty. It is very difficult to establish political will in Israel, Davutoglu said. He noted Turkeys quick dispatch of planes to help Israel battle a forest fire this month, and suggested that, had the situation been reversed, it would have taken days for the Israelis to behave likewise. Lieberman denounced those remarks as lies, recalling Israels aid airlift to Turkey after its 1999 earthquake. But he did acknowledge an Israeli contribution to the deadlock in US-sponsored negotiations with the Palestinians. When you look at all of the components in the coalition, are we capable today of presenting a (peace) plan? Lieberman asked rhetorically, citing sharp differences among the parties over how and if to meet Palestinian demands for statehood. He proposed a Plan B, a long-term interim accord with the Palestinians, which he said he would be prepared to finalise and present any time. He gave no further details. Israel says its marines opened fire in self-defence aboard the Mavi Marmara, an account disputed by the pro-Palestinian activists they faced. Israel has refused to ease its naval blockade on the Gaza Strip, saying arms shipments could reach the Hamas against whom it fought a war two years ago. Lieberman accused the Erdogan government of abetting the Turkish charity IHH, which sponsored the Mavi Marmara and other ships that tried to breach the blockade. Ankara wants Gazas borders opened but distanced itself from the IHH mission. If anyone should apologise, it should be the Turkish government to Israel over cooperation with terrorist elements, support for terrorism, support for the IHH, Hamas and (Lebanese) Hezbollah. There will be no (Israeli) apology, Lieberman said.