Top EU diplomat says preparing sanctions against Turkey over territorial dispute with Greece in Eastern Mediterranean.

The European Union has threatened Turkey with fresh sanctions - including tough economic measures - unless progress is made in reducing soaring tensions with Greece and Cyprus in the Eastern Mediterranean.

The EU's top diplomat Josep Borrell on Friday said the bloc wanted to give "a serious chance to dialogue" but was steadfast in its support for member states Greece and Cyprus in the crisis, which has raised fears of a military standoff.

A dispute over maritime borders and gas drilling rights near the island of Cyprus has reignited the long-running rivalry between Athens and Ankara, with the two neighbours staging rival naval drills.

The EU's measures, meant to limit Turkey's ability to explore for natural gas in contested waters, could include individuals, ships or the use of European ports, Borrell said.

"We can go to measures related to sectoral activities ... where the Turkish economy is related to the European economy," Borrell told a news conference, referring to possible sanctions.

The EU would focus on everything related to "activities we consider illegal", he said.

Borrell was speaking after EU foreign ministers met in Berlin to discuss support for Greece after it ratified a maritime accord with Egypt to counter Turkey's claims to energy resources in the region.

'Beyond the limits of EU'

Turkey's foreign ministry said the EU had no basis for its stance and rejected Greek maritime claims.

"It is beyond the limits of the EU to criticise the hydrocarbon activities of our country within our own continental shelf and demand that we stop them," spokesman Hami Aksoy said.

Borrell and German Foreign Minister Heiko Maas said the EU first wanted to give dialogue a chance to cool tensions between Greece and Turkey, which are NATO allies.

Turkey is also a formal candidate to join the EU, although its candidacy is at risk and could be withdrawn as a type of sanction, diplomats have said.

Two senior EU diplomats told Reuters news agency that foreign ministers agreed to leave any decision to EU government leaders, who are set to meet for a two-day summit from September 24.

"Nothing will be decided before the September European Council," a senior diplomat said, adding that Turkey could also be rewarded with greater access to the EU's market of 450 million consumers if it curtailed its drilling.

Greece and Turkey are at odds over the rights to potential hydrocarbon resources in the area, based on conflicting claims over the extent of their continental shelves.

Tensions escalated this month after Ankara dispatched the Oruc Reis seismic survey vessel in a disputed area following the pact between Athens and Cairo.

The agreement is seen as a response to a Turkish-Libyan accord signed in 2019 allowing Turkey access to areas in the region where large hydrocarbon deposits have been discovered.

On Thursday, the Turkish military issued an advisory, known as a Navtex, saying it will hold "gunnery exercises" in the Eastern Mediterranean off the coast of Iskenderun, northeast of Cyprus on September 1 and 2.