Pompeo: Despite tensions, Turkey remains a key USA ally

Turkey has repeatedly said Brunson's case is being handled by the courts and the government cannot intervene

White House spokeswoman Sarah Sanders told journalists both ministers had "played leading roles in the arrest and detention of Pastor Brunson", who led a Protestant church in the Aegean city of Izmir.

"We are facing an economic war, but we will win it", Erdogan said, adding Turkey is issuing Chinese Yuan denominated bonds for the first time, and to overcome difficulties due to credit rating reports, Turkey is turning towards China for external borrowing.

Brunson was moved to house arrest last week following almost two years in jail on terror-related charges but the change only increased tensions.

United States media reported there had been a deal with Turkey to free Brunson after Washington's ally Israel released a Turkish woman held on terror charges. The NATO allies have also been at odds over Syria policy.

"Brunson needs to come home, as do all the Americans being held by the Turkish government", Pompeo told reporters ahead of the summit. These are innocent people.

Cavusoglu also said the talks were "extremely constructive" but warned in comments to Turkish media that all the issues would not be solved "after one meeting".

"Everyone's very disappointed. Nobody expected this kind of treatment (toward) two Cabinet ministers", said Ilnur Cevik, a senior adviser to Turkish strongman President Recep Tayyip Erdogan.

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Erdogan saYS Turkey will never step back from defense industry projects, saying 48 out of the 400 projects are related to defence industry.

After reports that the U.S. would sanction individuals over the case, the lira hit a record low of 5.01 against the dollar, before rallying slightly to 4.9.

The standoff appears to be one of the most serious crises between Turkey and the United States in modern history, along with the rows over the 1974 Turkish invasion of Cyprus and the 2003 US-led invasion of Iraq.

President Donald Trump and Vice President Mike Pence, who shares Brunson's evangelical Christian faith, have made his release a priority. His next hearing is set for October 12.

Turkey's lira tumbled to a record low beyond 5 to the dollar on Thursday, after Washington imposed sanctions on two of President Tayyip Erdogan's ministers over the trial of a us pastor accused of backing terrorism.

Brunson faces up to 35 years in jail on charges of carrying out activities on behalf of two terror organisations - the group led by US-based Fethullah Gulen blamed for the July 2016 failed coup and the Kurdistan Workers' Party (PKK).

The FETO and its USA -based leader Fetullah Gulen orchestrated the defeated coup attempt of July 15, 2016, which left 251 people martyred and almost 2,200 injured.

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