EU discusses new sanctions on Turkey

They also include cuts in EU aid to for Turkish reforms and curtailing European Investment Bank (EIB) lending.

"The cuts in pre-accession funds were already agreed last year, so this would just be a symbolic confirmation of that," an EU diplomat told EUobserver on Wednesday (10 July), referring to a previous decision to hold back €147m due to Turkey's human rights abuses.

The freeze on EIB loans, which were worth €386m last year, could also "easily be done", the EU contact said.

But suspension of talks was a more delicate issue.

"We have to send the appropriate political message, while keeping some channels of communication open," the diplomat noted.

"We need to continue dialogue on certain issues which are important to us," the source added, referring to an old EU-Turkey deal to hold back refugees coming from Syria to Greece.

EU states' ambassadors will hold a second round of talks on the subject on Thursday, with a view to a public statement by EU foreign ministers next week.

But for his part, EU Council president Donald Tusk indicated that sanctions were a done deal.

"Despite our best intentions to keep good neighbourly relations with Turkey, its continued escalation and challenge to the sovereignty of our member state Cyprus will inevitably lead the EU to respond in full solidarity," he said on Wednesday.

The dispute arose after two Turkish ships began drilling for gas in waters claimed both by Cyprus and by the Turkish Republic of Northern Cyprus, which broke away in the 1970s, but which is recognised by Turkey only.

The row has also seen Egypt, Israel, and the US urge Turkey to stop, in a regional energy axis which aims to build a new gas pipeline to the EU, the EastMed pipeline, weakening Turkey and Russia's grip on energy supplies to south-east Europe.

"Israel ... reiterates its full support and solidarity with Cyprus in exercising its sovereign rights in its maritime areas," its foreign ministry said on Wednesday.

"On their own, these [EU] measures ... cannot and will not stop the destabilising behaviour of Turkey," Cypriot foreign minister Nikos Christodoulides also said on Cypriot TV.

"But it's important to send the message to Turkey that its actions are not going unobserved by the European Union," he added.

The Turkish foreign ministry hit back the same day with a message of its own.

"The title 'spoiled child of Europe' belongs to Greece [which also criticised the drilling]," it said.

The EU's "statements do not ever mention the Turkish Cypriots and as such ignore their very existence", it added.

"The European Union has become an actor of this play of unlawfulness staged by the Greek Cypriot-Greek partnership against the rights of the Turkish Cypriots," it also said.

And that meant the EU "will not be able to assume the role of an honest broker in the [UN-mediated] negotiation processes towards the settlement of the Cyprus issue", it noted.

The gas dispute comes after Turkish president Recep Tayyip Erdogan already caused a rift with the EU by jailing and torturing political opponents in the wake of a failed coup.

His one-man rule has also seen him put relatives in charge of the finance ministry and sack his central bank chief on a whim, creating a crisis of confidence in the Turkish economy.

He has cozied up to Moscow by buying anti-aircraft systems from Russia instead of the US, but that has prompted threats of American sanctions which could cause further financial pain.

US sanctions also on table

"We invite the US side to avoid taking wrong steps ... that will harm relations," his foreign ministry also said on Wednesday.

Turkish-occupied northern Cyprus hosts tens of thousands of Turkish soldiers and Ankara said it might send warships to escort its gas-drilling vessels.

Cyprus also hosts a British military base, while Greece, Cyprus' close ally, spends heavily on its armed forces in what is one of the most militarised regions in the EU neighbourhood.

But a second EU diplomat said there was no threat that the gas row could prompt a military stand-off.

"Cyprus is unhappy and has the full solidarity of member states, but they're working with the EU on a response in purely civilian terms," the EU source said.