EU leaders agreed to impose sanctions against members of the Belarus regime on Friday and fired a warning at Turkey over its gas drilling activities in the eastern Mediterranean.

In a summit statement hammered out over more than six hours of haggling, the 27 leaders warned Ankara it could face "immediate" sanctions if it persists with gas exploration in Cypriot waters.

The statement was enough for Nicosia to lift its veto on separate, long-delayed sanctions over the crisis in Belarus, which officials say will now come into effect on Friday.

But EU leaders voted against imposing restrictions on President Lukashenko himself, instead issuing travel bans and freezing the assets of some 40 Belarusian officials.

The first night of the two-day European Union summit was dominated by the bloc's fraught ties with Ankara, which is embroiled in a dangerous maritime stand-off with Greece and Cyprus.

Adopting a carrot and stick approach, the leaders' statement offers Ankara the prospect of closer ties and better trade if it commits to "pursuing dialogue in good faith and abstaining from unilateral actions".

But it warns that the EU is prepared to use sanctions -- possibly including broad-based economic measures -- if Turkey persists with what Brussels sees as the illegal infringement of Cypriot waters.

"In case of such renewed actions by Ankara the EU will use all its instruments and options available. We have a toolbox that we can apply immediately," European Commission President Ursula von der Leyen told reporters after the summit.

But previous EU warnings, and sanctions on individuals involved in the drilling, have done little to deter Ankara and the final statement falls some way short of the immediate action Nicosia had pushed for.

- Erdogan defiant -
Before the summit, Turkish President Recep Tayyip Erdogan struck a defiant note, telling his parliament that the EU had made itself a "hostage" of the "spoiled Greeks and the Greek Cypriot administration".

He vowed to maintain his "determined approach".

The EU leaders have agreed to "closely monitor developments" in the eastern Mediterranean and revert to the matter at another summit in December.

Despite the growing tensions with Erdogan's government, the EU is wary of alienating an important neighbour and NATO member which played a crucial role in ending the continent's 2015-16 migrant crisis.

Germany's Chancellor Angela Merkel, who has led a diplomatic outreach, was keen to stress that the potential remains for improved relations.

"We also want to take this positive agenda forward, because we are aware of the importance of strategic relations with Turkey, despite all the differences," she said.

Turkey-Greece tensions have eased slightly, with the two sides agreeing to resume long-stalled talks and on Thursday they set up a military hotline at NATO to avoid any accidental clashes in the area.

The EU leaders welcomed these steps and called for the efforts to be "sustained and broadened".

Further complicating the Turkey talks are allegations of meddling by Ankara in the conflict in Nagorny Karabakh, where nearly 130 people have been killed in a flare-up between Armenia and Azerbaijan.

French President Emmanuel Macron demanded Turkey explain what he said was the arrival of Syrian jihadist fighters in Azerbaijan.

"A red line has been crossed, which is unacceptable," he said. 

"I urge all NATO partners to face up to the behaviour of a NATO member."

- Belarus blockage cleared -
The agreement on Turkey persuaded Cyprus to lift the veto which it had imposed on sanctions over the Belarus political crisis to try to get more EU measures against Ankara over its drilling activity.

The EU will now impose asset freezes and travel bans on around 40 members of President Alexander Lukashenko's regime whom it blames for rigging the August 9 election and cracking down on protests afterwards.

But, unlike Britain and Canada, which have already sanctioned Belarus officials, the EU will not be imposing measures on Lukashenko himself.