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