By Tulay Karadeniz and Ibon Villelabeitia
ANKARA (Reuters)- Having failed to persuade Syrian President Bashar al-Assad to end a bloody crackdown, Turkey is preparing a list of sanctions against its one-time friend in a policy shift that aligns Ankara more closely with the West.
The measures, which mark a break from Turkey's long-standing record of resisting sanctions on its Middle Eastern neighbors, will complement a Turkish arms embargo already in place and underline how deeply Ankara has fallen out with Assad.
Sanctions are to be announced in the next few days, after Prime Minister Tayyip Erdogan visits border camps providing refuge for more than 7,000 Syrians who have fled the violence.
"Turkey is reverting to the U.S. and European line on Syria," said foreign policy expert Semih Idiz. "The relationship with Syria has collapsed and it is heading for a freeze."
Without giving details, the Turkish government has said the sanctions will target Assad's government, not the Syrian people.
Officials who spoke on condition of anonymity say they will affect military, banking and energy ties, among others.
Turkey is Syria's largest trading partner, and there had been plans to open eight new border gates. Bilateral trade was worth $2.5 billion in 2010, and investments by Turkish firms in Syria reached $260 million, Turkish data shows.
"The sanctions will follow the European and Western pattern of targeting individual members of the regime, banking, travel bans and that type of thing," Idiz told Reuters.
Under Ankara's previous policy of "zero problems" with neighbors, Turkey built up political and commercial ties with Syria, signaling a "common future" after the two almost went to war in the 1990s over Kurdish guerrillas harbored by Damascus.
But cracks appeared as Assad repeatedly ignored calls from Turkey and the international community to end his repression of anti-government protests, and as Ankara sided with popular sentiment in Arab uprisings rocking the region.
While the United States and the European Union gradually imposed sanctions against Damascus, Turkey until recently had hoped it could persuade Assad to change, driven in part by concerns for protecting its business interests.
The breaking point seems to have been a fruitless six-hour meeting between Foreign Minister Ahmet Davutoglu and Assad in Damascus last month. Since then, Erdogan has predicted that "sooner or later" Assad will be ousted by his own people and even called his former friend a "liar."
Speaking to journalists in New York last week after meeting U.S. President Barack Obama on the sidelines of the U.N. General Assembly, Erdogan said Ankara and Washington, having fallen out of step on sanctions against Iran over its nuclear program, were now working together to agree on sanctions against Syria.
Turkey's decision to host a NATO radar system has also pleased Washington and its allies, while angering Iran.
Erdogan said last week Turkey will intercept arms shipments transiting Turkey for Syria, and local media have speculated Turkey will close its airspace to Syria. In the past the neighbors conducted joint military exercises, and at the height of their friendship they even held joint cabinet meetings.
One product of those meetings was plans for Turkish banks to open branches in Syria, but officials quoted in Turkish media say sanctions will probably target the Syrian state banking system, just as U.S. and EU sanctions have done.
Plans to jointly form a Turkish-Syrian bank have also been shelved, along with plans to increase ties between the two countries' central banks, according to Turkish media.
Other items likely to be axed include plans to complete a natural gas project connecting an Arab pipeline with a Turkish pipeline. Turkish Petroleum Corporation (TPAO) will also probably have to drop plans for joint oil and gas exploration in Syria and third countries with the Syrian state oil company.
Turkish refiner Tupras bought 320,000 tonnes of heavy crude oil from the Syrian state oil company between March and September, according to company officials. But sanctions targeting Syrian banks will make future transactions difficult, even if there are no specific sanctions for the oil trade.
While Turkey has not formally cut ties, officials say there might be some steps, such as decreasing the level of diplomatic representation in Damascus, to further isolate Assad.
Ufuk Ulutas, a Middle East expert at the Ankara-based SETA think-tank, said Ankara may extend sanctions to investments and partnerships of Syrian businessmen who support the leadership.
The waiving of visas allowed closer economic interaction and tourism to flourish, but analysts say many Syrian businessmen opened accounts in Turkey to keep funds safe across the border.
"It is believed that some business groups that support the regime have interests in Turkey. Measures may be taken against these," Ulutas said.
To avoid inflicting hardship on the Syrian people, Turkey has ruled out measures such as cutting the sale of electricity to Syria or reducing the amount of water it lets through to the country on the Euphrates River.
The Syrian crisis has pushed Turkey and Washington into closer cooperation but Erdogan's criticism of Assad irked Iran.
Huseyin Bagci, an international relations expert at Ankara's Middle East Technical University, sees Turkey paying a price both for its shift on Syria and for hosting the NATO shield.
"Iran, Russia and China still back Syria. Turkey is risking facing opposition from all these countries by its attitude against Syria," he said. "Turkey-Syria ties are back to square one, back to the times of insecurity. Turkey stands to lose."
(Writing by Ibon Villelabeitia; Editing by Alistair Lyon)
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