NORTH AND SOUTH: CYPRUS DESK OFFICER MELLINGER'S

C O N F I D E N T I A L NICOSIA 000121 SIPDIS SIPDIS E.O. 12958: DECL: 01/17/2016 TAGS: PREL PGOV PHUM CY SUBJECT: NORTH AND SOUTH: CYPRUS DESK OFFICER MELLINGER'S JANUARY 11-13 VISIT TO CYPRUS Classified By: Ambassador Ronald L. Schlicher; Reasons 1.4 (b) and (d) ¶1. (C) Summary. Cyprus Desk Officer Elise Mellinger visited Nicosia January 11-13 and met with political leaders, businessmen, and academics on both sides of the Green Line to discuss the Cyprus issue, possible confidence building measures including the Ledra Street crossing, efforts to promote on-island trade and progress in combating Trafficking in Persons (TIP). Both her Greek Cypriot and Turkish Cypriot interlocutors were skeptical about the immediate prospects for restarting negotiations, particularly since the prospect of Parliamentary elections in May on the Greek Cypriot side were sucking up most of the political oxygen in the south. The Greek Cypriots with whom Mellinger met were looking to cast the finger of blame for the current political stalemate at Turkey and the Turkish Cypriot side. Mellinger's Turkish Cypriot interlocutors, meanwhile, stressed familiar themes of frustration over Greek Cypriot "intransigence." Turkish Cypriots were looking to third parties to lay the ground for productive talks by "pressuring" the Greek Cypriots, including through further steps to ease Turkish Cypriot isolation. Deputy UNFICYP head Susan Allee suggested that the leadership on both sides had hardened their positions. On TIP, Mellinger saw little evidence that either side was making good on earlier commitments to take firm action to combat trafficking and punish traffickers. End summary. Greek Cypriots Pointing the Finger of Blame... -------------- - ¶2. (C) Ambassador Erato Marcoullis, Director of the Cyprus Question and EU Affairs Division at the MFA, offered Mellinger an exposition on the island's demographic composition and its significance for the Cyprus issue. Prior to 1974, she commented, the Turkish Cypriot community had been scattered evenly across the island. Bizonality, therefore, represented a historic concession on the part of Greek Cypriots, one that needed to be factored into the balance of a satisfactory plan. In finalizing Annan IV, the UNSYG used his arbitration authority to satisfy all Turkish and Turkish Cypriot concerns, while -- according to Marcoullis -- "no Greek Cypriot concerns were accounted for." For any future negotiations, she stressed "the need for agreement, rather than imposition by the UNSYG." This is why the Greek Cypriots required acceptance of certain procedural conditions in advance of further talks: 1) a reasonable and flexible time schedule that was neither restricted nor open-ended, 2) no arbitration, and 3) only a solution agreed upon by both leaders can be put to referenda. When we pressed for a clearer sense of what a "reasonable and constructive time schedule" might look like in practice, Marcoullis hedged. The "time frame should be open ended, but not asphyxiating," she offered somewhat ambiguously, adding that "such things would be decided when the time comes." Marcoullis maintained that Ankara was the main obstacle to a resolution of the Cyprus issue. She stated that "Turkey must get out of the equation" of the negotiations. She assured us that "the Greek Cypriots want Turkey to have a smooth path to accession," but "unless Turkey sends signals to the UN regarding its willingness to give ground, Ankara faces no future in the EU." On the off chance that we missed the point, Marcoullis concluded, "Cyprus will make it very difficult for Turkey's future in the EU." ¶3. (C) AKEL's head of international relations Andros Kyprianou stressed his personal disappointment with AKEL's souring relations with the north's ruling CTP party and the Turkish Cypriot left's new-found preference for the right-leaning Greek Cypriot DISY party. The blame for this development, of course, he laid solely on Mehmet Ali Talat and the CTP leadership. When asked if AKEL's rejection of the referendum may have fundamentally affected the Turkish Cypriot view of the party, Kyprianou stressed that the Turkish Cypriot working-class remained largely supportive of AKEL. The problem was with the leadership rather than the rank-and-file. Despite this, the AKEL-CTP dialogue would continue and Kyprianou had hopes that it would produce positive results. The next meeting would address power sharing and governance under a solution. If AKEL and CTP can find common ground on changes to the Annan Plan, Kyprianou believed that this could serve as the basis for renewed negotiations in more formal, UN-sponsored channels. Meanwhile, AKEL was focused on the upcoming parliamentary elections and expected to hold its position as the largest party by percentage of vote. The results of the November party congress had been positive, but AKEL had some serious challenges ahead. Kyprianou indicated he would be quite satisfied with 32 percent of the vote. ...But That Shouldn't Get in the Way of Business -------------- --- ¶4. (C) Recently elected Greek Cypriot Chamber of Commerce (KEVE) President Manthos Mavromatis stressed the importance of "making a new start" on intra-island trade as there was now new Chamber of Commerce leadership on both sides of the Green Line. KEVE's goal was to increase trade between the north and the south without politicizing the mission. He believed that creating "common economic interests for stakeholders" with less protectionism on both sides of the Green Line would be critical. Econoff suggested that Mavromatis look into reviving discussions that took place in late 2005 with the Supermarket Associations of the north and south on the placement of Greek Cypriot and Turkish Cypriot goods on each others' shelves. Mavromatis agreed that this was a good idea and agreed to explore it further. Turning to the Cypriot economy, Mavromatis highlighted the ROC's exceptional economic performance in 2005, with a four percent growth rate and low inflation, despite the high price of oil. Given the overall economic climate, KEVE was fully supportive of the ROC's goal of EMU membership by January ¶2008. Mavromatis admitted that structural weaknesses still existed within the Cypriot economy, but believes that many of these would be corrected over time as Nicosia broadened its participates in the EU,s Lisbon process. The Cypriot economy could also be improved by government spending on more research and development projects. This would better utilize Cyprus' highly skilled labor force and create more attractive and diverse tourism products and services. The ultimate goal would be to attract a greater number of high income tourists through the development of casinos, golf courses, and marinas. UN Assessment: Both Sides Taking a Harder Line -------------- - ¶5. (C) Deputy Head of UNFICYP Susan Allee was skeptical that UN-led talks would resume in the near future. Leaders on both sides were increasingly dug-in and uncompromising. The controversial views on the Annan Plan that Presidential Diplomatic Advisor Tasos Tzionis had offered in an interview in November highlighted the hardening of the Greek Cypriot position -- and might represent a rejection of the long-standing goal of a bizonal, bicommunal, federal solution. By the same token, the Turkish Cypriots were becoming less flexible as their strategy of "trying to win friends and influence people" had not produced the results they were hoping for. From the Greek Cypriot perspective, the Turkish Cypriot agitation for an "end to their isolation" looked like a ploy to elevate the status of the "TRNC." New UN Chief of Mission Moller, in his initial meetings on both sides, would try to shift the focus of dialogue between the two sides toward achievable confidence building measures. The controversy over the opening of a new checkpoint at Ledra Street was one issue on which the UN felt movement might be possible, Allee said, although she recognized that an agreement would be difficult. A compromise might involve Turkish Cypriot removal of the pedestrian bridge accompanied by a Greek Cypriot removal of a wall displaying anti-Turkish propaganda. Allee confirmed our understanding that the letters SRSG Moller carried for Papadopoulos and Talat indicated UN U/S Gambari would not visit Cyprus before the May elections. Moller, she noted, unlike his predecessor, would carry the SRSG title and thus would travel regularly to Athens and Ankara to advance the cause of a Cyprus settlement. Turkish Cypriots (Still) Frustrated -------------- ¶6. (C) Erol Kaymak, Chair of International Relations at the north's Eastern Mediterranean University, described the current mood of the Turkish Cypriot community as angry and disappointed. He echoed the assessment we have heard elsewhere that Turkish Cypriots felt the international community had failed to deliver on its "promises" to reward the Turkish Cypriots for the "seismic political revolution" which led to their 2004 vote in favor of the Annan Plan. Turkish Cypriots had expected more concrete steps to "ease their isolation." At the same time, the Greek Cypriot leadership had failed to respond in kind to Turkish Cypriot gestures of good will -- making the pro-settlement "government" of Mehmet Ali Talat increasingly unwilling to offer further "concessions." Greek Cypriot claims that Talat was merely a puppet of Ankara -- and therefore not worth talking to -- were untrue and simply a pretext to avoid a productive dialogue with him, Kaymak said. Talat,s democratic legitimacy with his own people made him an appropriate interlocutor. This, combined with his ability to get hard things done in the north (such as the new property restitution legislation so important to Turkey) made Talat "indispensable" to Erdogan and even gave him modest influence over Turkish policy. ¶7. (C) Erkut Sahali, private secretary to "TRNC PM" Ferdi Soyer expressed similar pessimism about settlement prospects. Absent some kind of compelling "pressure" from the U.S. and UK, he suggested the odds of President Papadopoulos agreeing to engage in productive settlement talks were very slim. In separate meetings, the Vice Presidents of the Turkish Cypriot Chamber of Commerce Gunay Cerkez and Hasan Ince, "MP" Mustafa Arabacioglu from the center-right DP, and "MP" Hasan Tacoy from the opposition UBP echoed these themes. Cerkez and Ince felt that the EU, paralyzed from the inside by a veto-wielding Greek Cypriot government would never be able to play a neutral, constructive role in the settlement process. Arabacioglu suggested that even a vague threat from the U.S. that it might recognize the "TRNC" would be enough to force the Greek Cypriots to the table. According to Sahali, the current stalemate was unlikely to change with Papadopoulos in office at least until the south,s 2008 presidential elections. ¶8. (C) Sahali predicted that "fortunately" the Turkish Cypriots, pro-settlement leadership would probably stay in power for the foreseeable future. The current economic boom meant voters were unlikely to mobilize against the ruling CTP -- at least not in time for June municipal and parliamentary by-elections. In his meeting, the UBP,s Tacoy tacitly agreed, noting that his party's current leadership vacuum spelled electoral trouble for the nationalist opposition. Nonetheless, Sahali suggested that the current go-go economy was "unsustainable," since it was based largely on a property and construction bubble. This, if coupled with continued stalemate on the settlement track, could spell trouble for the north's pro-solution leadership over the long term. Medium-Term Steps: Easing the Economic Isolation -------------- --- ¶9. (C) As a result, Sahali, said Turkish Cypriot "government" and businesses were trying to develop a more sustainable economic base. Easing the economic isolation of the Turkish Cypriots was good for the community and would have the additional benefit of forestalling a backlash that could return rejectionist, nationalist leaders to power. One key element in the north's economic strategy, Sahali said, was to encourage foreign investment to expand the vital tourism sector. The goal was to attract more visitors from traditional source countries like the UK and Germany, while diversifying into the previously untapped "upscale and professional" tourist market. This approach had been successful so far, he said, with 130,000 non-Turkish visitors coming to the north in 2005. ¶10. (C) Sahali noted obstacles to further economic development, however. There was a pressing need to improve the north's legislative and legal infrastructure, he said, pointing to a recent scandal in which a foreign real estate developer cheated his clients and skipped the country -- damaging the north's image as a safe place to invest. Cerkez and Ince underlined further difficulties that hampered the development of the north's trade and productive sector. The EU,s direct trade measure had been shelved, transportation links (especially air links) were complicated by the outside world's "embargoes" on the north, and the Greek Cypriots had not overcome the "political and psychological barriers" to trading with the Turkish Cypriots. Property and CBMs -------------- ¶11. (C) In addition to seeking economic ways to lessen their isolation, the Turkish Cypriots were making other gestures of "good will" to smooth the way for reunification, according to Turkish Cypriot Mayor of Nicosia Kutlay Erk, and his ally in the ruling party, CTP SYG Omer Kalyoncu. Recent moves to open a crossing point at Ledra Street were a case in point, Erk maintained, despite "overblown" Greek Cypriot reactions to the "pedestrian overpass" he had constructed there. Erk insisted that the bridge was intended to ease the opening of the checkpoint by meeting the military's needs to resupply troops in the area -- and that the Turkish Cypriots would be willing to meet "any time and anywhere" to discuss the technical details of other arrangements. Taking the bridge down unilaterally at this point, however, would be too much of a concession, Erk suggested. He said he could envision a situation where traffic went around the bridge, which could be left standing as an "artistic" monument to peace. Erk criticized the UN, however, for "bowing to Greek Cypriot pressure" on the question of Ledra Street, suggesting that UNFICYP might no longer have the credibility to play honest broker in talks over the issue. The arrival of the new UNFICYP Chief of Mission might change the dynamics of the situation, but Erk felt that a "third party" such as the U.S. or "an EU member state" might be a more effective mediator. ¶12. (C) Meanwhile, both Erk and Kalyoncu predicted that the new Turkish Cypriot property legislation would pass muster with the ECHR -- even if some Greek Cypriots would have to accept compensation rather than restitution of their property in the north. Indeed, although the new Property Commission had not been formed, some Greek Cypriots had already made informal inquiries about compensation or restitution. Erk and Kalyoncu expect more applications if the ECHR rules that the new Commission indeed constitutes an effective local remedy. The echoed the common local assumption that Turkey, which had strongly supported passage of the north's new property regime, would gladly foot the bill for the Commission's decisions on compensation and restitution in order to stave off even costlier Loizidou-type ECHR rulings in the future. TIP Issues: Not a Priority on Either Side of the Green Line -------------- -------------- ¶13. (C) Neither our Greek Cypriot nor Turkish Cypriot interlocutors had much new information to offer regarding TIP issues. Eliza Savvidou from the ROC Ombudsman's Office expressed considerable frustration with the government's delay in implementing the TIP comprehensive National Action Plan that the Council of Ministers adopted last spring. On the Turkish side, Sahali reiterated that the weaknesses in the north's infrastructure kept them from effectively preventing and containing the problem, but maintained that no new cabaret licenses had been issued under the Talat administration. He also pointed to the creation of a new victim helpline in the north as a step in the right direction. SCHLICHER