EU NORTH CYPRUS TRADE/AID: UPDATE

C O N F I D E N T I A L BRUSSELS 004617

SIPDIS

DEPT FOR EUR DAS KENNEDY

E.O. 12958: DECL: 10/26/2014
TAGS: PREL ZS CY EUN USEU BRUSSELS
SUBJECT: EU NORTH CYPRUS TRADE/AID: UPDATE

REF: USEU BRUSSELS 3821

Classified By: USEU POL Harry O'Hara, reasons 1.4 b and d.


1. (C) Summary: The EU has separated its trade and financial
package for North Cyprus in order to get the aid package
approved on November 22. One Council source told us that this
is a "split in timing -- not in substance" because member
states have informally committed themselves to get a trade
package together for North Cyprus sometime in 2005. The
procedural torpor is a result of Cyprus's hard line and EU
unwillingness to isolate or punish a member state. End
Summary

Financial Package: The Way Ahead
--------------


2. (C) Council Secretariat and Commission officials tell us
that once the Foreign Affairs Committee of the European
Parliament approves the Commission proposal of 259 million
Euros of financial assistance for North Cyprus (positive vote
expected late October 26),it will be submitted to the next
Plenary Session of the European Parliament (o/a November 18),
where approval is expected. From there, the Commission
financial package will be submitted to the November 22 EU
General Affairs and External Relations Council (GAERC) for
final approval.

Trade Package: A Commitment to Act in Good Faith
-------------- ---


3. (C) A Council official involved in navigating the
assistance package to the GAERC told us that the financial
package is pre-cooked and that the Cypriots and the Greeks
are comfortable with it. However, to free up the financial
package, EU member states, under the Dutch Presidency, had to
agree to split the assistance package from the trade package.
The UK was unhappy with this split but accepted a
"gentlemen's agreement" that a final EU trade package would
not be forgotten or diluted and that member states would
commit themselves to getting an agreement within a fixed time
frame (notionally some time in early 2005).

Consensus vice QMV
--------------


4. (C) Previously we reported on a split between the legal
services of the Council and Commission over whether qualified
majority voting (QMV) or consensus would be needed for a
decision on the trade package. Typically, trade matters with
third parties are decided by QMV. The Commission argued that
this was no exception. Others in Council and the Dutch
Presidency argued that, politically, it was not acceptable
for the EU to approve a trade measure to North Cyprus against
the wishes of Cyprus. A Council source told us that there
remains considerable concern among member states over the
perception of forcing something on Cyprus, a small and new EU
member, without its approval. Our Commission interlocutors
were not happy with this outcome, and worry about how little
the EU has been able to do in North Cyprus.

Comment
--------------


5. (C) Even through Cyprus has played this very tough, many
EU member states do not want to be seen as punishing or
"bullying" a member state. The Dutch Presidency, in
particular, has demonstrated flexibility and patience with
Cyprus by first getting them to let the assistance package
get out of COREPER and on its way to the GAERC, and then
ruling against the Commission on the trade package.
Unfortunately, this cautious approach has slowed down
movement on both aid and trade for North Cyprus. As a
result, six months after the referendum, North Cyprus has
nothing to show from the EU for its support for the UN
reunification plan.

McKinley