VAROSHA - THE ETERNAL BARGAINING CHIP

C O N F I D E N T I A L SECTION 01 OF 03 NICOSIA 000113 SIPDIS E.O. 12958: DECL: 01/30/2016 TAGS: PGOV PREL GR TU CY SUBJECT: VAROSHA - THE ETERNAL BARGAINING CHIP REF: A. 05 NICOSIA 988 ¶B. 05 NICOSIA 1886 Classified By: Ambassador R. Schlicher, for reasons 1.4 (b) and (d). ¶1. (SBU) Turkey's recent proposal to link the opening of ports in northern Cyprus to the implementation of the Ankara Protocol has already been rejected outright by the GOC. The Greek Cypriots have made clear their preference to discuss the return of Varosha in exchange for limited Turkish Cypriot trade, under EU auspices, through Famagusta. In light of this -- and given the likelihood that Varosha will feature prominently in any future wheeling-dealing between the two sides -- we thought it would be useful to provide a bit of background on Varosha, and on recent proposals involving the city. THE TOWN -------------- ¶2. (SBU) Varosha ("Maras" in Turkish) is Cyprus's famous "ghost city" abutting the Green Line. Over 6,000 acres in size, Varosha hugs the island's eastern seashore immediately south of Famagusta. The city was founded in Ottoman times as a Greek/Christian annex to Famagusta, since non-Muslims were forbidden to live within the city walls. Segregation of Famagusta's Greek and Turkish Cypriots became even more pronounced during the violent intercommunal tensions of the 1960s; Turkish Cypriots concentrated inside the old city walls and Varosha become almost entirely Greek. ¶3. (SBU) Varosha grew in wealth and importance over the years, however. By 1974, its booming tourist industry made it one of the most important centers of economic activity on the island. Several hotels, restaurants and bars were clustered along the beachfront, and the city was home to about 60,000 residents. Varosha was evacuated after brief but intense Turkish bombardment during the 1974 war. Our consular officials are occasionally allowed to survey the ten AmCit-owned properties inside the closed city; they report eerie scenes of quickly-evacuated homes with clothes still hanging out of drawers and offices strewn with paper (ref a) -- evidence of how little time the inhabitants had to leave during the fighting. The city has since been a closed zone under the control of the Turkish military, although small portions of the town have been reopened for use as Turkish officers, quarters, and civilians have access to a church/museum at the edge of the town. A LONG-TIME BARGAINING CHIP -------------- ; ¶4. (SBU) Varosha has been a bargaining chip since 1977, when the idea of opening the town for Greek Cypriot resettlement was first raised in talks between Spyros Kyprianou and Rauf Denktash. Although no deal involving Varosha has ever been consummated, the Turkish decision to keep the city unoccupied makes a certain amount of tactical sense. Refugees from the town are a powerful lobby in the south, and Varosha's lost beaches are second only to Kyrenia as a focus for Greek Cypriot nostalgia. Shortly after the 2004 Annan Plan Referendum, Turkish Cypriot leader Mehmet Ali Talat publicly reminded Greek Cypriots that if they had said yes, refugees from Varosha "would have been home by now" -- an observation that stung many in the south, even if it did not inspire much Greek Cypriot second-guessing about their opposition to Annan. ¶5. (SBU) There are also those in the south who believe that Varosha could be quickly revitalized as a lucrative tourist center, although our impressions are that most of the town would probably need to be razed and rebuilt from scratch. After 30 years of neglect and exposure to the salt air, Varosha's buildings would require more than a dab of paint to become a viable place to live or do business. POST-ANNAN HAGGLING OVER VAROSHA -------------- ¶6. (C) After the 2004 Annan Referendum, both sides have toyed with ideas to move the settlement process forward again. Varosha has figured prominently in these plans. In the early days of Cyprus's EU membership, the GOC (which did not want to be forced into using its veto) sought to block the EU's draft direct trade regulation by proposing watered down alternatives to trade in order not to "upgrade the TRNC." In August 2004, the GOC floated a proposal involving the return of Varosha in exchange for GOC agreement to allow the Turkish Cypriots to trade with the EU through the port of Famagusta (provided the port was under some kind of joint administration involving Greek Cypriots and/or the EU). ¶7. (C) Holding out for direct trade, which the Turkish Cypriots assumed would include the opening of all ports including Ercan airport, Talat let it be known he would not accept the Greek Cypriot idea. We are not aware that the two sides ever discussed this idea face-to-face in 2004, although it seems likely that the topic of Varosha was hashed over in general terms during various party-to-party contacts held between political leaders from the two communities. THE (IN)FAMOUS LUXEMBOURG TALKS -------------- ¶8. (C) In spring 2005, the Luxembourg presidency decided to renew efforts toward some kind of deal on proposed EU measures for the north -- reportedly after an April meeting between PM Junker and President Papadopoulos in which the latter expressed concern that the upcoming UK presidency would broker a trade/aid deal inimical to Greek Cypriot interests. Accordingly, the Luxembourgers invited both sides to closed-door talks in Brussels to discuss some kind of quid-pro-quo. ¶9. (C) According to Turkish Cypriot "government" sources, there was considerable hesitation on Talat's part about whether to accept the invitation. Although wary about allowing discussion of settlement-related issues in an EU (as opposed to a UN) forum, Talat ultimately agreed. Talat reportedly concluded that EU-brokered talks were better than no talks at all and, perhaps more importantly, that he did not want to be portrayed as the man who wouldn't sit down and deal. ¶10. (C) So in early June 2005, delegations from both sides held two rounds of talks in Brussels under Luxembourg auspices. Varosha featured prominently in these talks. According to two of the Turkish Cypriot participants (Talat advisors Erhan Ercin and Rasit Pertev),the first round of the talks went surprisingly smoothly. The Greek Cypriots (led by Presidential Diplomatic Advisor Tassos Tzionis and Cyprus Ambassador in Brussels Nicos Emiliou) reportedly did not immediately rule out Turkish Cypriot demands for direct trade and an end to sports embargoes, etc. in exchange for the renovation of Varosha (under Turkish Cypriot or UN auspices) and phased return of Greek Cypriots to the city. As part of this deal, the Greek Cypriots reportedly asked for a moratorium on property development in the north. The Turkish Cypriots claim they were even presented with a joint Greek Cypriot-Luxembourg non-paper on the subject. According to the Turkish Cypriots, this first round of talks adjourned for a week after the Turkish Cypriots promised to prepare detailed maps of the north in order to discuss the details of a development moratorium. ¶11. (C) The second round of talks went nowhere, collapsing acrimoniously on June 15, 2005. According to the Turkish Cypriots, the GOC representatives backed away from their initial willingness to talk about trade (which they reportedly insisted was solely an "interna U matr") ra property moratorium ("they even refused to look at our maps," said one Turkish ypriotdelegae). At this point, according t the Trkish ypriot, they made a final "big push," offering the immdiate and unconditional return of Varosha to GOCcontrol in exchange for an end to trade and other "embargoes," but e offer was rejected. ¶12. C) The Greek Cypriots, needless to say, paint a very different picture of what transpired in Brussels and cast much of the blame on the Turkish military. The Greek Cypriots say they offered to allow EU-supervised trade through Famagusta in exchange for Varosha (i.e., the idea floated in 2004). They blame the Turkish Cypriots for the collapse of talks, suggesting that Talat and the Turkish army were unwilling to accept territorial adjustments without a full settlement deal (presumably along the lines of the "unacceptable" Annan Plan). ¶13. (C) Hoping to use the desire of Greek Cypriot refugees to return to Varosha as a lever to pressure and embarrass President Papadopoulos, Talat subsequently told the press that he had offered to return Varosha immediately, suggesting that the GOC was lying to the public about what had been on the table in Brussels. The GOC counterattacked in full spin mode, denouncing Talat's offer and suggesting he was not in a position to follow through anyway. Pointing to a statement by Talat that the Turkish Cypriot goal in Brussels was to get "everything short of recognition," GOC officials dismissed the offer as a political ploy to "upgrade the TRNC." LUXEMBOURG POSTMORTEM AND TURKEY'S NEW "ACTION PLAN" -------------- -------------- ¶14. (C) We have tried, with moderate success, to triangulate with European diplomatic sources what actually happened at the Brussels talks. The French DCM (who claimed to have access to "insider information" on the meetings, which probably means Tasos Tzionis) insisted that it was the Turkish army who objected to any bargaining involving their equities in Varosha, pulling the plug on Talat's final "big push" offer to give back Varosha before it could be explored. The Turkish Cypriots deny this. Although they admit they went out on a limb offering Varosha without pre-clearing the deal with Ankara, Talat's advisors remain convinced they could have persuaded the army to accept a deal involving Varosha if it involved real concessions (such as direct trade, direct flights, etc. from the Greek Cypriots. ¶15. (C) It seems more likely that it was the Greek Cypriots who slammed on the brakes. In late June, the EC's former Ambassador here, Adrian van der Meer, confided to Ambassador Klosson that the Commission believed the Greek Cypriots never intended to strike a deal, but instead were hoping to prompt the decoupling of EU trade and aid proposals for the north -- passing the latter and shelving the former. ¶16. (C) This tracks with what we have heard from other sources, including a Dutch diplomat here who worked closely in support of her understaffed Luxembourg colleagues (who have no permanent diplomatic presence in Cyprus) during the Grand Duchy's presidency. She remarked privately that Luxembourg had started its presidency generally sympathetic to the Greek Cypriot position, but that their experience in the hot seat (especially during these talks where the GOC appeared to have no intention of negotiating seriously) left them feeling angry at the GOC's tactics and more ambivalent Qout the m its of the Greek Cypriots, case. ¶17. (C) Since then, there has been little serious discussion of Varosha. The GOC has rejected, out of hand, Turkey's January 2006 "Action Plan" as "reheated food" that offers nothing new. Government spokesman Lilikas noted that the Greek Cypriot proposal regarding Varosha, however, remains on the table -- although he gave no indication the GOC is prepared to go beyond it. Apparently, the August 2004 GOC proposal is still "fresh;" it is only Turkey's ideas that are stale. For Greek Cypriots, the question of Turkish Cypriot isolation is related to the Cyprus problem and Turkey's role as occupier and aggressor. Discussing Turkish Cypriot trade in the context of settlement-related questions (like Varosha) is one thing; establishing a link between concessions to the Turks and Turkey's fulfillment of "pre-existing obligations" to the EU (such as the implementation of the Ankara Protocol) is not. NOTE ON VAROSHA OWNERSHIP AND PROPERTY LAW SUITS -------------- --- ¶18. (C) Recent property-related law suits brought by Greek Cypriots against Turkey (as the "occupying power") in the European Court of Human Rights have potential implications for Varosha, since many cases, including the landmark Xenedis-Arestis case (ref b),involve property in the town. The initial Turkish defense in this case was to move for dismissal on the grounds that the Xenedis-Arestis house was actually built on land owned by the Turkish Cypriot "Evkaf" foundation. Indeed, many Turkish Cypriots still maintain that most of Varosha rightfully belongs to Evkaf, but that the land was illegally seized by Greek Cypriots or sold to them under duress at rock-bottom prices by Turkish Cypriots forced to flee during the 1960s. The ECHR disagreed with Turkey's claim, however, (at least with regard to the Xenedis-Arestis property) and allowed the suit to go forward. ¶19. (C) Ultimately, the ECHR ruled the Turkish side must set up an "effective local remedy" to deal with Xenedis-Arestis and other complaints over seized property. The December 2005 Turkish Cypriot law establishing a Property Commission was an attempt to comply with this directive and (theoretically) provides for restitution of -- or compensation for -- property in Varosha. If the ECHR accepts this law as effective local remedy, the Turks and Turkish Cypriots would be forced either to return Greek Cypriot property in Varosha or buy out the previous owners. ¶20. (C) In either case, Varosha's utility as a Turkish bargaining chip could be diminished. But the sheer number of refugees from Varosha and the amount of the property there make it unlikely Greek Cypriot claims will ever be fully settled by the courts or the Property Commission. Varosha is set to remain an unresolved bone of contention -- and a potential deal-sweetner -- in any future talks between the two sides. SCHLICHER