(Bloomberg) -- Turkey’s options for retaliating against Joe Biden’s landmark description of the Ottoman-era mass killing of Armenians as genocide include suspending a key defense deal with the U.S, a person familiar with the matter said.

While Biden’s move was largely symbolic, it set the tone for his administration’s approach to ties with Turkish President Recep Tayyip Erdogan, who’s expected to weigh in on the row after chairing a Monday cabinet meeting. No U.S. leader since Ronald Reagan has used the genocide term for fear of alienating NATO ally Turkey.

Biden Marks Armenian ‘Genocide’ in Challenge to Ally Turkey

One repercussion could be Turkey freezing the Defense and Economic Cooperation Agreement that has enabled collaboration with the U.S. in regional conflicts such as Syria and Iraq since it was signed in 1980, according to an official familiar with Turkish deliberations at the highest level of Erdogan’s administration.

The pact, a centerpiece of the defense cooperation, provides both Turkey and the U.S. with security assistance, enabling intelligence sharing, joint drills and increased U.S. military access to Turkish airbases.

Suspending it could appease an important political ally -- Devlet Bahceli, the head of the Nationalist Movement Party -- and consolidate support among nationalist voters at home. But a deeper confrontation with the U.S. would risk undermining the economy as the Covid-19 pandemic continues to rage. Recent standoffs with the U.S. have caused substantial financial pain for Turkey, and could limit its response this time.

As he wrangled with the U.S. in the past, Erdogan has threatened to deny the U.S. access to an early-warning radar at Kurecik, a critical part of NATO’s ballistic-missile defense capabilities, as well as Incirlik Air Base, close to Syria and used by the Pentagon to store tactical nuclear weapons. Neither happened.

Turkey launched a cross-border attack against separatist Kurdish militants in northern Iraq within hours of Biden’s statement, and other retaliatory options could include attacking allied Kurdish fighters in Syria who received U.S. assistance to fight Islamic State, the official said.

The dispute over how to label the atrocities is at the core of tensions between Armenia and Turkey, which have no diplomatic ties and face each other across a closed border. In 2020, the Turkish military supported Azerbaijan in its armed conflict against Armenia over the disputed region of Nagorno-Karabakh, an enclave inside Azerbaijan with an Armenian ethnic majority.

Turkey could also take new steps likely to antagonize landlocked Armenia, which consumes large amounts of Turkish food supplies sent via Georgia, and increase support for Azerbaijan, the person said in options also confirmed as being under consideration by a second Turkish official.

Turkey Hits Brake on Syria Foray After Deals With Russia, U.S.

The genocide designation -- while echoing a move Congress made in 2019 -- only drove home the U.S. administration’s willingness to play hardball with Erdogan’s government. News of Biden’s move tilted sentiment against Turkish assets which fluctuated on Monday. The lira dropped as much as 1.1% on Monday before rising 1% to 8.3065 per dollar as of 3:27 p.m. in Istanbul as analysts tried to assess whether tensions between the two countries will prove to be temporary.

Biden on Saturday commemorated the 106th anniversary of the mass killing of up to 1.5 million Armenians expelled by the Ottoman Empire, the precursor to the modern Turkish state. Turkey disputes the death toll and argues that while atrocities took place, they were the consequence of war after some Armenians joined Russian troops fighting the Ottomans during World War I.

The U.S. leader’s statement stoked years-long frictions between the U.S. and Turkey, not least over Ankara’s purchase of a Russian air-defense system. Biden himself has a history of strained relations with Erdogan -- once calling him an “autocrat” and voicing support for his defeat at the ballot box. He spoke to Erdogan on Friday for the first time since taking office.

Turkey later accused Biden of bowing to political pressure at home at the risk of ruining relations with a key NATO ally.

©2021 Bloomberg L.P.