GREEK FM GUARDEDLY OPTIMISTIC ABOUT CYPRUS

1. (C) SUMMARY: Following a day of meetings between the
GoG and Greek Cypriot President Papadopoulos, Greek FM
Bakoyannis told Ambassador she is guardedly optimistic about
the agreement signed by Greek Cypriot and Turkish Cypriot
leaders on July 8. While the key will be getting the
respective negotiators to come to agreement on the parallel
substantive and technical issues, Bakoyannis called "clever"
Papadopoulos' idea to start with concrete economic issues
related to the EU, like whether to adopt the euro. On the EU
front, Bakoyannis said her hopes were pinned on the "slim"
chance the parallel opening of Famagusta port (with Varosha
too) and opening of Turkish ports through implementation of
the Customs Union protocol might work. The European
Commission, working with the Finnish Presidency, will have
the lead. While the FM said Papadopoulos is determined to
see progress on the UN dual track talks during July, she
noted the Greek PM reiterated his position in public
statements that the process be free of "asphyxiating
deadlines." Bakoyannis told Ambassador that although she is
taking a beating in the Greek press for purportedly "giving
away Greek Cypriot sovereignty," she and the GoG would
continue to support this process. She asked us to suggest to
the Turks that they do their part to help as well. END
SUMMARY



2. (U) Ambassador met with Foreign Minister Dora Bakoyannis
July 11 for a readout of Cypriot President Papadopoulos'
meetings in Athens on July 10 with Greek government
officials. Papadopoulos visited Athens to give his Greek
"cousins" details of the five-point agreement he signed on
July 8 with Turkish Cypriot leader Talat (reftel) presented
by UN U/SYG Ibrahim Gambari, and to coordinate strategy. The
Cypriot leader met for two hours in a closed-door session
with Greek Prime Minister Karamanlis, after which Foreign
Minister Bakoyannis, her Cypriot counterpart FM Lillikas, and
other GoC and GoG officials joined the discussion. The PM
later hosted a dinner for the Cypriot delegation.
Papadopoulos separately saw President Papoulias and
opposition PASOK leader Papandreou.



3. (C) Bakoyannis noted that the July 8 agreement was a
breakthrough, in large part because no one, including UN
U/SYG Gambari, believed Papadopoulos would come to the table
with Talat. Responding to Ambassador's query on
Papadopoulos' motivations, Bakoyannis said he "wants to give
it another try," and added that she believes he has "good
will" to make progress. Not inexperienced in Cyprus matters,
however, Bakoyannis said she was "optimistic; but not very
optimistic" about the agreement's eventual chances of
success. Bakoyannis said she and the GoG will remain
supportive of the negotiation process, and mentioned that we
might suggest that the Turks do the same.



4. (C) Bakoyannis reported that Papadopoulos is "satisfied"
with the agreement, stressing that for continued movement to
take place, the two respective negotiators now have to come
to some decisions on both confidence building measures and
technical issues. She thought Tassos Tzionis, rather than FM
Lillikas, would be the primary Greek Cypriot negotiator.
While she believed that references to "Annan Plan" would be
dropped (among other reasons, she said Gambari told her the
UNSYG does want his name constantly associated with the
failed referendum), she echoed points Talat made publicly
(reftel) that "the many" points of the plan on which the two
sides have already agreed will be used as a basis for
negotiations.



5. (C) Responding to which substantive issues will be raised
first, Bakoyannis indicated that Papadopoulos had the
"clever" idea to start off with the economy, using concrete
issues that have a connection to the EU such as whether to
adopt the euro. Per reftel comment, Ambassador probed for
details on how strict the July 31 deadline would be for total
agreement on the substantive agenda. Without giving a clear
answer, she declared that Papadopoulos is "determined" to see
movement in July, and she agreed that there must be some
movement before the "moment of truth" in October, when the
European Commission issues its report on Turkey's progress
towards accession. On timelines, she pointed out that PM
Karamanlis' statement after his meeting with Papadopoulos
called for a "carefully prepared process without arbitration
and asphyxiating deadlines."



6. (C) On the EU/trade front, Bakoyannis told Ambassador that
she continues to support the idea of finding a way to open
Famagusta, believing that this is the "only way out." At the
same time, the Turkish Cypriots have to accept that this will

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include a discussion of Varosha. If they will not discuss
Varosha, she continued, "the whole thing is a non-starter."
Bakoyannis stressed that if Varosha is negotiated in earnest
and with good intention, the Famagusta port reopening would
be such a "win-win" and "face-saving measure" that it could
change the entire situation on the island, allowing Erdogan
to reopen the ports, thereby making progress toward meeting
EU criteria. Ambassador asked whether Varosha would have to
be opened to residents, or for hotel operations. FM
Bakoyannis said "that would be an issue for negotiations,"
and speculated the result could be a staged approach. The
European Commission, supported by the Finnish Presidency, she
said, would take the lead on the Famagusta/Varosha issue.



7. (C) Bakoyannis was alarmed by recent opinion polls
suggesting that only the Greeks and British remain strong
proponents of Turkey's EU accession. She wondered aloud
whether Turkey was still in favor of its own accession,
repeating Erdogan's comment that he would not make
compromises on Cyprus for the sake of the EU. She repeated a
comment she made to Gul in their recent meeting, that it is
not just the goal of EU accession, but also progress on the
road to the EU that is important for Turkey's sake. In her
opinion, now is the time for Erdogan to show the political
courage necessary to make progress on Cyprus and Turkey's EU
prospects.



8. (C) Finally, Bakoyannis told Ambassador that "there are
limits" to what the GoG can do. She is taking a beating in
the Greek press, she lamented, mentioning editorials that
accuse the GoG of "giving away" Greek Cypriot sovereignty.
As a word of advice, Bakoyannis mentioned that DAS Matt Bryza
should "pay attention to semantics" during his upcoming visit
to Cyprus.
RIES