European Investment Bank to freeze lending to Turkey till year-end

The European Investment Bank (EIB), which is Turkey’s biggest single lender, will not do any new government-linked lending in Turkey until at least the end of 2019 while it carries out a strategy review, Reuters reported on Wednesday.

The bank’s move is in line with the punitive measures the European Union announced last week over what it says Turkey’s illegal gas drilling activities near Cyprus in the eastern Mediterranean. Turkey currently has two drilling ships and one survey vessel anchored off Cyprus.

“As the EU Bank, the EIB will follow the Council’s recommendations and, notably, will take a restrictive approach toward the submission of new lending operations to its Board for approval for the rest of the year,” Reuters quoted an EIB spokeswoman as saying.

In the last three years, the bank has spent in the country annually between 0.4 billion euros ($446 million) and 2.2 billion euros ($2.45 billion). It has not made any investment in Turkey since the beginning of the year.

The freeze is not currently expected to affect private sector projects and the bank could still sign around 350 million euros worth of deals before the end of the year if it gets the green light from EU finance ministers on the EIB board, Reuters said.

The bank will review the strategic orientations of its lending activities in Turkey throughout the year, the spokeswoman said.

The EU’s punitive measures also include the freeze of 146 million euros of pre-accession assistance for Turkey for next year, suspension of negotiations for an aviation agreement, and putting on hold any high-level meetings with Turkish officials.

Turkey says the EU’s measure will not affect the country’s plans for gas exploration and drilling.

Turkey, the only nation to recognise Northern Cyprus, accuses Nicosia of ignoring the fair share of Turkish Cypriots over the potentially rich hydrocarbon resources of the island, and has territorial claims that overlaps with Cyprus’ exclusive economic zone (EEZ).