TURKISH CYPRIOTS LAY DOWN MARKERS ON PORTS/TRADE;

C O N F I D E N T I A L SECTION 01 OF 03 NICOSIA 000838

SIPDIS

SIPDIS

E.O. 12958: DECL: 06/06/2016
TAGS: PGOV PREL EUN TU CY
SUBJECT: TURKISH CYPRIOTS LAY DOWN MARKERS ON PORTS/TRADE;
SOMEWHAT MORE POSITIVE ON UN TRACK

REF: A. NICOSIA 698


B. BRUSSELS 1667

C. LIBBY-EUR/SE EMAIL

D. NICOSIA 816

E. NICOSIA 113

F. NICOSIA 781

G. ANKARA 3265

H. NICOSIA 47

Classified By: Ambassador Ronald Schlicher, reasons 1.4 (b) and (d).


1. (C) SUMMARY. According to the Turkish Cypriots, June 1
talks in Vienna between "TRNC President" Talat's U/S Rasit
Pertev and representatives of the Austrian Presidency
explored ways to move forward on question of EU direct trade
measures for the Turkish Cypriots. The Austrians, keen on
averting an accession "train wreck" with the Turks (refs a
and b),reportedly sought to reconcile Greek Cypriot and
Turkish Cypriot demands by suggesting a deal involving direct
trade through Famagusta port in exchange for some kind of
opening of Varosha, EC inspectors at the port, and a UN role
in administering law and justice there. The Turkish Cypriots
report that the idea floated by the Austrians was a
non-starter, however. Turkish Cypriot prickliness about
"sovereignty," parochial economic concerns, and a decidedly
unhelpful attitude from Ankara all mean that Talat will
likely bargain hard in any haggling over direct trade --
insisting on elements that would likely make the deal
unacceptable to the Greek Cypriots. Furthermore, given the
shortcomings and delays that plague the EU's Green Line
Regulation and its financial aid for the Turkish Cypriots,
Talat doubts the EC can implement any direct trade measure
fairly even if a deal is reached (ref c). Convinced that no
good can come of flexibility with the EU -- and paranoid over
Papadopoulos's ability to outflank them at every turn -- the
Turkish Cypriots have settled into a defensive crouch. This
has allowed the Greek Cypriots to paint them successfully as
the intransigent party with the international community.
This same Turkish Cypriot defensiveness is also undermining
progress in the UN-led negotiations on establishing technical
committees. UN SRSG Moller told us he could not understand
why the Turkish Cypriots were not more supportive of the
technical talks process. Having reached an impasse in
negotiations on an overall text, Moller was now trying to
persuade the parties to allow at least two of the committees
to begin work before UN U/S Gambari visits the island in
early July. END SUMMARY.

VIENNA'S TRIAL BALLOON
--------------


2. (C) During a June 1 visit to Vienna by "TRNC President"
Talat's Under Secretary Rasit Pertev, the Austrian Presidency
reportedly discussed a possible deal to allow passage of the
EU's long-delayed direct trade measure for the Turkish
Cypriots. Direct trade is a priority for the "TRNC"
leadership, which feels that the EU has failed to keep its
2004 commitment to allow trade with the north as a reward for
Turkish Cypriot support of the Annan Plan. According to the
Turkish Cypriots, the Austrians acknowledged the need to live
up to this "promise," especially because Ankara needed cover
to open its own ports to Cypriot vessels and avoid an
accession meltdown this fall.


3. (C) In a June 6 meeting with the Ambassador, Talat and
Pertev characterized the Vienna talks as a bust. In a
separate meeting, Talat's EU advisor Erhan Ercin specified
that the Austrians had floated the idea of allowing direct
trade through the north's Famagusta port in exchange for some
kind of opening/return of Varosha, an EC role in the
inspection and certification of goods being traded through
Famagusta, and a UN role in the administration of law and
justice inside the port. The two sides also discussed the
possibility of expanding direct trade measures to allow
transshipment of third-country goods via the north.

TRADE DEAL: "MISSION IMPOSSIBLE?"
--------------


4. (C) The Turkish Cypriots reacted coolly. In public
statements immediately after his meetings, Pertev sounded
truculent. He praised Austria's efforts to secure a deal
but, in an eerie echo of Papadopoulos's position regarding
Turkey's commitments to open its ports to ROC vessels,
stressed that direct trade was a commitment the EU had
already made. Indeed, Pertev called direct trade a Turkish
Cypriot "right" for which they would not "bargain," a
sentiment he repeated later to the Ambassador. Privately,
Talat's private secretary Asim Akansoy sounded more flexible
about his boss's willingness to negotiate for trade, but he
was downbeat this would lead anywhere. There were too many

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deal-breakers (and too few sweeteners) for the Turkish
Cypriots among the Austrians' ideas, which "closely tracked"
Greek Cypriot positions.


5. (C) According to both Akansoy and Ercin, UN administration
of law and justice at the Famagusta port was a non-starter,
even though the Turkish Cypriots would be willing to allow
Commission inspectors at the port to ensure compliance with
EU regulations. But a UN law-and-order role would involve
the surrender of "sovereignty" in the port, which the Turkish
Cypriots say has been "theirs" for "hundreds of years" -- and
which all settlement plans, including Annan, would have left
under their control. Adding insult to injury, according to
Ercin, is the fact that any arrangement allowing the UN to
assume control of the port would involve a formal agreement
between UNFICYP and the ROC, explicitly acknowledging Greek
Cypriot formal "ownership" of the port and, in effect,
enlarging the UN-controlled Buffer Zone at Turkish Cypriot
expense. In his public statement in Vienna, Pertev echoed
this sentiment, saying that the Turkish Cypriots could accept
UN control over all the island's ports (including,
unrealistically, those in the south),but not in Famagusta
alone.


6. (C) Varosha, which the Greek Cypriots have repeatedly
identified as a sine quo non for any direct trade deal, is
also off the table, according to Talat. The fate of the
fenced-off area (which is also frequently called simply
"Famagusta" by the Greek Cypriot press, thus confusing the
uninitiated in Brussels and at the UN) is a
settlement-related question and can be solved only in the
context of high-level UN-brokered talks. Talat's advisors
also stress that, since Varosha is their biggest bargaining
chip (ref e),the Turkish Cypriots would need to be assured
of "a whole lot more" (such as the authorization of direct
flights between the north's Ercan Airport and the EU) if they
were to give it up.


7. (C) Pertev told the Ambassador that the Austrians had
experienced a "rude awakening" about how difficult it would
be to reach a deal on direct trade, since making a direct
trade deal palatable to one side automatically rendered it
unacceptable to the other. A trade/Famagusta/Varosha package
seemed like "Mission Impossible," one Austrian official
reportedly told him.


8. (C) A further complication, according to several Turkish
Cypriot sources, is that Talat has begun to doubt the
feasibility of direct trade with the EU even if a deal could
be reached. Pointing to serious limitations in the
"malfunctioning" Green Line Regulation, and recalling the
delays and problems with implementation of the EU's financial
aid package (ref f),Ercin told us that the Turkish Cypriot
leadership was suffering from a "crisis of confidence" with
the Commission. The EC had proven unsuccessful, he
contended, in resisting Greek Cypriot pressure to water down
these measures; the Turkish Cypriots had no reason to think
that the implementation of direct trade would be any better.
This made it increasingly difficult for Talat to make any
concessions in order to get trade -- especially with the
nationalist "FM" Serdar Denktash noisily pressing his
"government" partners to take a harder line with the EU.

TURKISH CYPRIOTS HESITANT WITH THE EU...
--------------


9. (C) There are other factors that make the Turkish Cypriots
reluctant to accept the Austrian offer. The well-connected
shippers who currently use the Famagusta port enjoy a cozy
monopoly, which the instinctively market-wary Turkish Cypriot
authorities are hesitant to tamper with. A greater EU or UN
role in the port would certainly disrupt this arrangement.
Furthermore, sources close to Talat confess that the Turkish
government is not encouraging the Turkish Cypriots to think
creatively or offer concessions to unblock trade. Indeed, we
have heard from several sources that the GOT, visiting AKP
delegations, and the local Turkish ambassador have all
encouraged Talat to take a generally harder line -- and
promised him that Turkey won't "sell out" the Turkish
Cypriots by moderating its demand for an end to isolation.
Turkish Cypriot leaders are unanimous in the belief that
Turkey is ready to freeze its accession process rather than
give into ROC demands for the unilateral opening of mainland
ports (ref g). This hardly encourages Talat to be flexible.


10. (C) It is a common mistake, however, to lay all the blame
for Turkish Cypriot policies on Turkey's doorstep. Although
he is not a truly independent actor, Talat nonetheless enjoys
more room for maneuver than many outsiders give him credit
for (ref h). His prickliness over Turkish Cypriot
"sovereignty" is a heart-felt, home-grown phenomenon that

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resonates strongly with the electorate on whose support he
and his "government" rely. Spurned by the Greek Cypriot
rejection of the Annan Plan and angry over the ROC's
continued policy of isolating them, Turkish Cypriot voters
are increasingly happy to see their leadership flip the bird
when foreigners press them for more "concessions."

...AND WITH THE UN
--------------


11. (C) The increasingly obvious chip on the collective
Turkish Cypriot shoulder not only makes talks with the EU
more difficult, but also undercuts the UN-backed effort to
kick-start technical committees -- with the Turkish Cypriots
pitching a fit over seemingly minor points of terminology,
and vigorously resisting Greek Cypriot efforts to include
broader "substantive" issues on the technical agenda.
Although Talat expressed cautious optimism that the technical
committees would eventually start working, SRSG Michael
Moller told the Ambassador on June 6 that he remained puzzled
by the unconstructive stance the Turkish Cypriot side had
adopted in the talks.


12. (C) As far as Moller could see, the Turkish Cypriot
position in the talks only made sense if their ultimate goal
was partition rather than reunification. Moller said that he
had made this point to both Talat and Pertev and had told
them "if that's really what you're after, put it on the table
so we can talk about it openly." Both Talat and Pertev had
denied to Moller that they were pursuing a stealth separatist
agenda. Moller told Ambassador on the evening of June 6 that
this implied suggestion that the technical committees process
had reached a dead end might actually spur the Turkish
Cypriots to move forward, since the prospect of being accused
by the UN of having a separatist agenda would be a diplomatic
disaster for the Turkish Cypriots.


13. (C) Moller said that he was ready to put aside the
so-far unsuccessful negotiations on a text that would guide
the overall process of technical talks, and was pushing the
parties to agree to a verbal announcement that at least two
of the committees would begin work. Crime was an acceptable
topic for both sides, but discussions on an economics
committee had encountered "choppy waters." The Greek Cypriot
side had proposed a fairly expansive set of themes for this
committee, while Pertev insisted on something much more
restrictive. Moller was thinking of introducing a third
committee -- dealing with cultural and religious sites -- to
help balance the package. Moller was again critical of the
overall Turkish Cypriot approach. The original concept had
been that the committees would start working on everyday
issues while the "steering committee" -- Moller, Pertev and
President Papadopoulos's Diplomatic Advisor Tasos Tzionis --
would explore the options in more contentious, political
areas. UN U/S Gambari was planning to visit Cyprus sometime
between July 3-9. This was a hard deadline for the technical
committee process. Both parties should want to have some
kind of agreement in place to avoid a negative assessment by
Gambari.

COMMENT
--------------


14. (C) Since 2004, the Turkish Cypriots have been content to
sit on their laurels and bask in their reputation as the side
that voted "yes." As the memory of 2004 fades, and anger
grows over the fact that their pro-settlement policies
rhetoric and gestures have not been reciprocated, Turkish
Cypriot interest in creative steps to keep the initiative
(such as opening churches in the north or unilaterally
setting up new Green Line crossings) has flagged visibly;
Denkstash-style positions and rhetoric are occasionally being
sounded. Greek Cypriot success at outflanking them in Paris
and Brussels -- and at painting them as hot-headed
rejectionists on Cyprus and in Europe -- has made Talat and
his "government" touchy and paranoid. The Turkish Cypriots
have settled into a defensive crouch that does not bode well
for future negotiations with either the EU or UN. The best
way for the Turkish Cypriot to turn the tables and regain the
political high ground is to find a way to start the technical
committees, float positive ideas on how to re-engage in a
broader political process, and be flexible and positive with
the EU in order to get some kind of direct trade. At this
point, this is a tall order. END SUMMARY.
SCHLICHER