(Bloomberg) -- European Union foreign ministers agreed to freeze most high-level contacts with Turkey and cut the flow of funds to the country, while holding back for now on sanctions that could target Turkish companies involved in offshore drilling in the eastern Mediterranean.
The decision, signed off at a meeting of EU foreign policy chiefs in Brussels, calls for suspending negotiations on an aviation agreement with Ankara, halting scheduled ministerial meetings, reducing financial aid and inviting the European Investment Bank to review sovereign-backed lending to Turkey.
The step comes as Turkey and Cyprus are at loggerheads over offshore gas reserves in the eastern Mediterranean, which are claimed by the Cypriots and disputed by Ankara. Turkey has sent exploration vessels into the area, a move that Cyprus calls a violation of its sovereignty.
The spat with Brussels adds to a climate of uncertainty weighing on Turkish assets, following the dismissal of the country’s top central banker and the prospect of U.S. sanctions over President Recep Tayyip Erdogan’s decision to purchase Russian missiles. Washington has also called on Turkey to cease drilling off the coast of Cyprus.
Read more: Why Russian Missiles Divide Turkey and the U.S.
The foreign ministers also reiterated that the EU is working on targeted sanctions in light of Turkey’s continuing controversial drilling practices. In doing so, they sought to strike a delicate balance between sending a clear message to Ankara and agreeing on measures that won’t harm the interests of EU nations or cut all ties with Turkey. The EU wants to keep some lines of communication open in areas such as migration and terrorism.
Despite renewed tensions, the EU is wary of an escalation that would risk a landmark 2016 migration agreement, under which Turkey stemmed the bulk of refugee flows to Europe in exchange for financial assistance. Even though options for targeted sanctions were mandated by the bloc’s leaders last month, they aren’t being activated at this stage.
EU leaders have sided with Cyprus in the dispute, declaring last month they’re ready to consider sanctions if Turkey continues drilling. That could target companies, individuals, and Turkey’s deep-sea hydrocarbon exploration and production sectors, though such measures weren’t officially on the menu of options debated this time round.
Still, the escalation marks a new low in EU-Turkey relations, which have been deteriorating since Erdogan pushed through constitutional reforms that Brussels claims weaken the country’s democratic safeguards.
The European Commission says Turkey has been drifting further away from the prospect of eventual EU membership, and some member states, such as Germany and France, have considered formally shelving long-stalled accession talks.
--With assistance from Nikos Chrysoloras.
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