EU leaders to make good on trade promises with Turkey, but also threaten sanctions (Updated)

European Union leaders made good on Thursday on a 2016 promise to deepen trade ties with Turkey, but also warned Ankara to expect sanctions if it restarts exploration over disputed hydrocarbons in the eastern Mediterranean.

“We call on Turkey to abstain from renewed provocations or unilateral actions in breach of international law,” EU leaders said in a statement following a discussion by video conference, saying they will review progress in June.

Aiming to reward Turkey’s President Tayyip Erdogan for pulling back from confrontation over gas exploration, the EU can now prepare for a deeper customs union with Ankara.

EU leaders said that their experts can “work on a mandate for the modernisation of the customs union,” according to the statement, allowing the 1990’s-era trade agreement to be expanded to services, farm goods and public procurement.

The customs union expansion would bring Turkey, an EU candidate for membership of the bloc, fully into the internal market of the world’s largest trading bloc, allowing almost all goods and services to flow unhindered and swelling its size by 80 million Turkish consumers.

The plan dates from 2016, when Turkey agreed to host Syrians fleeing civil war, but a host of disagreements between Ankara and Brussels over human rights, hydrocarbons and Turkey’s stalled EU membership bid prompted EU states to hold back.

Negotiations could still take several years to complete and the EU is concerned that Erdogan could change course as he seeks a bigger regional role for Turkey, moving against the EU.

The EU threatened “to use the instruments and options at its disposal to defend its interests,” according to the statement, referring to travel bans and asset freezes on individuals, as well as sanctions on important sectors of the economy such as energy and tourism.

Ankara accused Brussels on Wednesday of “playing for time” and rejects talk of sanctions as unhelpful and a distraction between the two trading partners.

But EU diplomats say they have reason to be cautious.

Last weekend, Erdogan abruptly pulled Turkey out of a convention protecting women from violence, a move that the United States and the EU said marked another backward step for human rights in Turkey. He also plunged markets into turmoil by sacking a central bank governor admired by Western investors.

“Rule of law and fundamental rights remain a key concern,” EU leaders said, concerned about growing authoritarianism under Erdogan.