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EU signals sanctions on Turkey over Cyprus drilling - draft

BRUSSELS, July 11 (Reuters) - The European Union will put on hold high-level talks with Ankara and negotiations on an air transport agreement, as well as freeze funding for Turkey next year, over "illegal" drilling for gas and oil off Cyprus, according to a draft statement seen by Reuters.

The joint EU decision, which may still be changed, will be discussed among national envoys in Brussels on Thursday with the aim of adopting it when the bloc's foreign ministers meet on Monday.

"In light of Turkey's continued and new illegal drilling activities, the (EU) decides to suspend negotiations on the Comprehensive Air Transport Agreement and agrees not to hold further meetings of the high-level dialogues for the time being," the draft said.

"The Council endorses the (European) Commission's proposal to reduce the pre-accession assistance to Turkey for 2020 and invites the European Investment Bank to review its lending activities in Turkey, notably with regard to sovereign-backed lending," it said.

It added that the EU would be ready to introduce more restrictive measures against Turkey should it continue with the drilling. (Reporting by Gabriela Baczynska Editing by Edmund Blair)