ISTANBUL (Reuters) - Turkish Cypriot leader Mustafa Akinci has proposed to the internationally recognised Greek Cypriot government that the two sides cooperate in the search for gas off the island of Cyprus, Turkey's Foreign Ministry said on Saturday.

The proposal comes after a European Union warning that it could curb funding for Turkey in retaliation for what it calls Ankara's illegal drilling for gas and oil off Cyprus in the eastern Mediterranean.

Akinci "presented a new comprehensive cooperation proposal prepared by the Turkish Cypriot side for the exploration and exploitation of hydrocarbon resources around the island of Cyprus to the Greek Cypriot side through the United Nations," Turkey's Foreign Ministry said in a statement.

The proposal said that Turkish and Greek Cypriots "are equal partners on the island, have equal rights, so should share the income and cooperate in the area of ​​hydrocarbon resources and benefit from these resources simultaneously", the ministry said.

If adopted, the proposal would "initiate a new period of cooperation between the two parties," it added.

Cyprus was divided in 1974 after a Turkish invasion triggered by a brief, Greek-inspired coup. Several peacemaking efforts have failed and the discovery of offshore resources in the eastern Mediterranean has complicated the negotiations.

Turkey and the Cypriot government have overlapping claims in the area. Last week Turkey said a drilling ship had arrived east of Cyprus and would start operating there, two months after a first Turkish drilling ship started work west of the island.

Cyprus says Turkey's actions are contrary to international law and the EU is set to curb contacts and funding for Ankara, linked to its EU accession talks, in retaliation for what it calls Turkey's illegal drilling operations, according to a draft statement seen by Reuters.

The document said the EU stood ready to ramp up sanctions further.

(Reporting by Dominic Evans; Editing by Mark Heinrich)

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