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By Ezgi Erkoyun ISTANBUL (Reuters) - President Tayyip Erdogan said Turkey will stand its ground after U.S. President Donald Trump threatened to slap sanctions on Ankara if it does not free an American pastor, broadcaster Haberturk reported on Sunday. Relations between the United States and Turkey are on the line in the dispute over pastor Andrew Brunson, Erdogan was quoted as saying by TRT Haber and other media. Trump on Thursday threatened to impose "large sanctions" on Turkey unless it freed Brunson, who has worked in Turkey for more than 20 years and has been accused of helping the group Ankara says was behind a failed military coup in 2016. The pastor, who has denied the charges, is now under house arrest and faces up to 35 years in jail if found guilty. "We will not step back when faced with sanctions," Erdogan was quoted as saying. "They should not forget that they will lose a sincere partner." Brunson, who is from North Carolina, was transferred to house arrest last week after 21 months of detention in a Turkish prison. Diplomats have been working to settle the tense dispute and on Saturday U.S. Secretary of State Michael Pompeo discussed the status of the pastor with Turkey's Foreign Minister Mevlut Cavusoglu, the State Department said. Brunson's detention has deepened a rift between Washington and Ankara, which are also at odds over the Syrian war and Turkey's plan to buy missile defenses from Russia. It was not clear what would be the nature of sanctions threatened by Trump but Washington was already working on bills related to Turkey due to other issues of concern. The U.S. Senate has demanded a block on sales of F-35 jets to Turkey unless Trump certifies that Turkey is not threatening NATO, purchasing defense equipment from Russia or detaining U.S. citizens. Also, a U.S. Senate bill to restrict loans to Turkey from international financial institutions passed through a committee, an important early step for the bill to become legislation. Erdogan said that Turkey would resort to international arbitration if the United States does not deliver an agreed sale of F-35 fighter jets to Ankara, broadcaster Haberturk reported. "(If the U.S. blocks F-35 jets) We said we would go to international arbitration. If it comes to that point, there are other alternatives," Erdogan was quoted as saying. Israel confirmed on Friday that Trump had requested Israel to release a Turkish woman it accused of ties to Hamas. Israel deported Ebru Ozkan on July 15 and media reported that Washington was hoping that Turkey would release Brunson in exchange. Erdogan confirmed that Turkey had asked for U.S. help in securing the return to Turkey of Ozkan, broadcaster Haberturk reported, but denied any form of deal to release Brunson in exchange. "We told the U.S. that they might help for released and innocent Ebru to get back her passport and return to Turkey," Erdogan was quoted as saying by Haberturk. "However, we did not say we will give you Brunson in return." (Writing by Ezgi Erkoyun in Istanbul and Patrick Rucker in Washington; Editing by Sandra Maler and Susan Fenton)