EU HAND-WRINGING ON CYPRUS REFERENDUM: NO CARROTS,

C O N F I D E N T I A L SECTION 01 OF 02 BRUSSELS 001787

SIPDIS

EUR FOR RIES & WESTON

E.O. 12958: DECL: 04/23/2014
TAGS: PREL CY TU EUN UN USEU BRUSSELS
SUBJECT: EU HAND-WRINGING ON CYPRUS REFERENDUM: NO CARROTS,
FLIMSY STICKS

Classified By: USEU External Affairs Officer Andrew Erickson
for reasons 1.5 (b) and (d).

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SUMMARY
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1. (C) One day away from a Cyprus Referendum, EU officials
are wringing their hands in Brussels about the likely fate of
the Annan Plan -- and the likely accession of a divided
Cyprus into the EU on May 1. The Head of the Commission's
Cyprus unit told us April 23 that he is anticipating numerous
headaches due to Turkish non-recognition the Republic of
Cyprus -- a full EU member -- as of May 1. Pressed by us on
the possibility of EU actions to punish Cypriot
intransigence, our interlocutor noted that Article 7 of the
EU Treaty could be used, although he pointed out that this
stick is untried, and thus should be considered a flimsy one.
In a related action, EU Parliament Pat Cox has initiated a
separate Article 7 proceeding on the run up to the
referendum, although EU Parliament action is more symbolic
than determinant, barring further Council action.


2. (C) Comment: Despite the hand-wringing, the EU no longer
has any carrots to encourage a positive vote in southern
Cyprus, and its only stick, the unprecedented imposition of
Article 7 of the Treaty of European Union, would be very
difficult to wield, requiring as it does a consensus
(excluding Cyprus) to proceed and a qualified majority to
punish. Article 7 could in an extreme application lead to
the denial of its European Council vote to Cyprus. But
Turkey's situation as of May 1 is far worse. Its accession
quest is now crippled by its non-recognition of an EU member
and on-going occupation of sovereign EU territory. Combined
with EU dissatisfaction with the Layla Zana sentence, this
has been a bad week for Turkey in Brussels. End comment and
summary.

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Facing Facts: There is No Plan B
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3. (C) One day away from a Cyprus Referendum expected to
reject the Annan Plan in the south, EU officials are wringing
their hands in Brussels about the likely demise of the Annan
Plan -- and the certain accession of a divided Cyprus into
the EU on May 1. Commission Cyprus Unit Head Leopold Maurer
told us April 23 that he is anticipating numerous headaches
due to Turkish non-recognition the Republic of Cyprus -- a
full EU member -- starting as early as two weeks from now.
As an example, he cited a working meeting on the Turkish-EU
customs relationship that will now need to address Turkish
non-recognition of Cypriot goods. Given Cyprus' full EU
membership, it will be covered by EU agreements with Turkey
on the same terms as any other EU state.

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No Carrots
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4. (C) Despite good efforts by Commissioner Verheugen, EU
Parliament President Cox, and Hirep Solana to make positive
statements about the need for a yes vote, Cyprus politicians
know that the EU holds no positive leverage at this point.
EU officials have been especially miffed that their
entreaties were kept off the airwaves by Greek Cypriot media.
Even so, as the treaty of enlargement has been ratified, and
accession is a done deal, there is nothing more the EU
bureaucracy can offer by way of blandishments to southern
Cyprus voters. The April 15 Pre-Donors' Conference, with its
generous promise of post-settlement assistance, was the EU's
last carrot, and it apparently failed to find a taker in the
south.

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And the Stick Looks Weak...
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5. (C) Pressed on the possibility of EU sanctions for
Cypriot intransigence and manipulation of the vote, Maurer
noted that Article 7 of the EU Treaty could theoretically be
used, although he noted that this stick has never been used
under any circumstances. As a politically theoretical
instrument with many bars to use, it should be considered a
flimsy one to wield in an attempt to get Cyprus voters to
change their votes.


6. (C) Maurer explained that under Article 7 of the Nice
Treaty, member states could unanimously (with the exception
of Cyprus itself) and with the two-thirds assent of the
European Parliament, determine that rejection of the Annan
Plan, or the circumstances of that rejection, were "a serious
and persistent breach" of one or more of the Article 6
provisions calling for respect of the "principles of liberty,
democracy, respect for human rights and fundamental freedoms,
and the rule of law...". The Council would then vote by
qualified majority rules on what sanctions to impose.


7. (C) We noted to Maurer that any member state could block
the invocation of Article 7 under the terms outlined by the
treaty, and some member states, (Greece, for example) would
probably be inclined to do so. Maurer agreed, but reiterated
that this was the only legal avenue available to the EU to
attempt to redress any manipulation of the Cyprus poll,
presuming that the UN Secretary General decided that the
polling had not been free or fair. (Comment: although Maurer
didn't mention them, the only other punishments we could
imagine might be ones entailing blocking Cyprus from getting
anticipated benefits, rather than trying to withdraw existing
ones. In theory, the EU could send a clear message to Cyprus
that so long as the Green Line persists, Cyprus could never
expect to get full Schengen treatment; another might be to
block Cyprus admission into the Eurozone. End comment.)

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EU Parliament Begins
Article 7 Proceeding
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8. (C) On April 23, EU Parliament President Cox's diplomatic
adviser Joe Dunne (strictly protect) told us that President
Cox received a letter from DISY leader Nico Anastassiades
complaining about the management of the referendum in Cyprus.
Following consultations with party leaders, Cox referred
Anastassiades' complaint to Parliament for consideration as
an Article 7 proceeding. Dunne said that there was no
objection from party leaders to proceeding along this route,
and he assessed that there was a reasonable prospect of
getting a two-thirds majority in Parliament, probably on the
last and only remaining scheduled vote of this session, on
May 5. We asked Dunne about the difficulty of getting a
consensus in the European Council (including Greece but
excluding Cyprus) on Article 7. He replied that his focus is
getting a two-thirds majority in Parliament, and said that he
is optimistic about this prospect. The Council issues are
not his purview, and he would not be drawn into speculation
on the ultimate outcome of an Article 7 effort in the
Council.

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Comment: Much Hand Wringing
- Good Parliamentary Action
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9. (C) With the Accession Treaty signed, sealed, and
delivered, the Commission no longer holds either carrots or
sticks to push a Cyprus deal. Given this reality, working
level Commission priorities have shifted focus from finding a
Cyprus settlement to making Cyprus's EU accession work on an
island divided into mutually hostile camps. The immediate
impact of Cyprus accession will be to put Turkey in
non-compliance with its customs treaty with the European
Union, given that Turkey's deals with the EU now have to
apply in Turkey's obligatory dealings with new EU member
Cyprus. Over the longer term, Turkey is going to have to
cede additional ground on Cyprus issues if it is to maintain
good relations with the EU during its run up to talks on an
accession date. This hurts Turkey's prospects for a
favorable accession deal in December, and adds to the bad
blood in a relationship already scarred this week by EU
dismay about the Layla Zana verdict.


10. (C) More to the positive side, EU Parliament President
Cox has once again shown his willingness to try to go the
extra mile for a Cyprus settlement, even as the EU's
political options for encouraging settlement diminish. We
are not in a position to evaluate Cox's adviser's assessment
that he can get a two-thirds majority in Parliament to
sanction Cyprus on Article 7 grounds. If he does, however,
the quest to punish rejectionist Cyprus through Article 7
will likely face an extremely tough environment in the
European Council, where Greece alone can block further
action. Even then, all members except Cyprus would have to
accept the premise that Cyprus' expected no vote -- or the
process that led up to it -- indeed constitutes "a serious
and persistent breach" of one or more of the Article 6
"principles of liberty, democracy, respect for human rights
and fundamental freedoms, and the rule of law...".

Schnabel