CORRUPTION SCANDAL CRIPPLING "TRNC GOVERNMENT"

C O N F I D E N T I A L SECTION 01 OF 03 NICOSIA 000610

SIPDIS

SIPDIS

FOR EUR/SE

E.O. 12958: DECL: 07/09/2017
TAGS: CY PGOV PREL TU
SUBJECT: CORRUPTION SCANDAL CRIPPLING "TRNC GOVERNMENT"

REF: A. NICOSIA 00497


B. NICOSIA 01691

Classified By: Ambassador Ronald L. Schlicher for reasons 1.5 (b) and (
d)


1. (C) Summary: The "parliament" of the self-proclaimed
"Turkish Republic of Northern Cyprus" ("TRNC") officially
entered its summer break on July 13, but the "government,"
led by "Prime Minister" Ferdi Soyer's Republican Turkish
Party (CTP),will find the summer months to be uncomfortable.
CTP's junior "coalition" partner is tainted by allegations
of corruption, prompting most commentators to suggest the
"government" is unlikely to be able to continue under its
current configuration. The uncertainties of the election
atmosphere in Turkey, combined with a difficult seat
distribution in "parliament," gave CTP little room to
maneuver. Though there are still some outcomes by which CTP
could save face, all come with political cost and risk:
possible scenarios include a reforging of the CTP-DP
alliance, a very improbable CTP-UBP "grand coalition," or a
minority CTP "government," limping toward early elections.
End Summary.

SCANDAL...
--------------


2. (SBU) Details of possible misuse of office on the part
of two "ministers" from the Free Reform Party (OP) have
steadily accumulated in the press for several months and
compounded the previous embarrassment of having had their
"Economy Minister", Enver Ozturk, ejected from "government"
under a cloud of corruption (ref A). The new allegations
against the "ministers" center on murky land transfers to the
Variant company, an arm of Turkey's appliance manufacturer,
Alarko, represented on the island by Ahmet Ozcag. The
allegations crystallized when audio recordings of Ozcag hit
the press, in which he apparently claimed his company had
given $2 million in bribes to OP "ministers" to gain a
contract to build a luxury hotel. In subsequent interviews,
Ozcag modified his story; he claimed that the money was
loaned to the OP to assist in its founding -- OP was created
in September of 2006 by a handful of politicians who quit the
right-wing opposition parties to forge a coalition
"government" with CTP -- and that the new party, in return,
offered to transfer land to Variant as repayment, an offer
Ozcag claims was refused.



3. (SBU) Both "Deputy Prime Minister and Foreign Minister"
Turgay Avci and "Environment Minister" Asim Vehbi are
beleived to be involved in the alleged wrong-doings. Ozcag
also named Ahmet Yonluer, the head of the "Directorate of
Religious Affairs", as an intermediary for some of the funds
transfers. Previous rumors had it that Yonluer was a
go-between among OP, CTP, and Turkish Prime Minister Recep
Tayyip Erdogan, who had an interest in seeing a "TRNC
government" less constrained by nationalist and military
interests than the previous CTP-DP coalition. Since Ozcag's
allegations, the press has also aired recordings of a furious
Yonluer threatening to pull strings to have Vehbi removed
from office, suggesting the rumors of Yonluer's political
role may carry some element of truth. Other allegations
accuse the OP "ministers" of being involved in a scheme to
illegally raise money by selling large numbers of lottery
tickets to businessmen seeking to curry favor with the
"government."



4. (SBU) The scandal inconveniently gathered steam during
the early summer, providing fodder for the otherwise dull
front pages of the Turkish-language Cypriot press. Ongoing,
ill-defined protests against the "government" by labor unions
on both the left and the right of the political spectrum
adopted the corruption issue as a focus of their discontent,
and have been calling for the dissolution of the
"government". Meanwhile, Avci attempted to defend himself in
a protracted speech in "Parliament", but only appears to have
dug a deeper hole for himself. Avci admitted to having done
personal business with Ozcag, but claimed -- in the vaguest
possible terms -- his actions as a "government minister" were
entirely innocent and legitimate. He then went on to win no
friends by trying to spread blame for rampant corruption on
his former colleagues in the opposition, who he claimed had
been feeding at the "government" trough unchecked for many

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more years than had been OP.



5. (C) For his part, "Director of Religious Affairs" Ahmet
Yonluer professes his innocence. In an animated meeting with
Poloff on June 29, the mufti claimed there were "dark forces"
-- suggesting an alliance of former "TRNC President" Rauf
Denktash and Turkish military officers -- who want him
removed from his position and who jumped at the opportunity
of a shady scandal to tar his good name. Yonluer conjured a
far-fetched scenario in which these dark forces may also be
trying to tarnish Turkish PM Erdogan, whom he considers a
good friend, in the final weeks before elections in Turkey.


...AND ITS DISCONTENTS
--------------


6. (C) Embassy contacts and the press are in near-unanimity
that the OP scandal has festered to the point that "PM" Soyer
must do something tangible or risk damaging the CTP's
reputation. Omer Kalyoncu, General Secretary of the CTP, in
a meeting on June 21 agreed that the scandal reflects badly
on the "government" and, therefore, on the CTP, but noted
that there was not much the "government" could do until
either OP sorted out its own house or until an investigation
could be held. He also foreshadowed Avci's performance in
"parliament," intimating that the corruption problem is
endemic to the right-wing parties in the "TRNC." Both the
National Unity Party (UBP) and Democrat Party (DP) have been
just as badly behaved while serving in "government", and OP
is cut of the same cloth.



7. (C) Opposition politicians have been less charitable,
condemning the OP "ministers" and lambasting the CTP for
tolerating them for far longer than it should. Kenan Atatol,
a fomer UBP "Foreign Minister," told poloff in a June 28
meeting that CTP should not have been in the least bit
surprised by the scandal, claiming that the OP members are
the worst kind of politicians: opportunists who are willing
to sell out their professed loyalties for power and money. A
fellow UBP member, Hasan Tacoy, echoed this sentiment,
claiming that the OP members had already resigned in spirit
and were weathering the storm until they could find a more
opportune time to offically leave the "government". Kudret
Akay, an advisor to DP chairman Serdar Denktash, saw the
situation in a similar light, claiming in a July 5 meeting
that the CTP-OP coalition's days are numbered. The
predictions of Tacoy and Akay may have been hasty, though, as
the "government" has managed not only to limp into the summer
recess but also to pass a controversial social security law
on its way out the door. But the dwindling clout of the
"government" has been demonstrated in its inability to forge
a package of constitutional and legal reforms in a series of
meetings with the leaders of the opposition.



8. (C) There are a handful of possible solutions to CTP's
woes. The most tantalizing is the possibility of a CTP
minority government supported by DP. Kudret Akay claims that
DP offered this solution in exchange for a bevy of
"legislative" and "electoral" law reforms -- designed to
remove the incentives that encourage the formation of
renegade parties, such as the OP -- coupled with a commitment
to early elections. Though Akay claims both CTP and UBP are
cautiously supportive of the idea, much like the other
tripartite meetings, the plan appears to be bogging down in
the details. Rumors of DP replacing OP in the "government"
-- an arrangement that could buy "President" Talat some
political space with his critics among nationalist circles
and the Turkish General Staff -- are also making the rounds.
In a meeting with Poloff on July 3, Serdar Denktas flatly
denied that such a solution was in the cards; however, former
DP "Economy Minister" Dervis Deniz, in a subsequent meeting
with Econoff on July 18, claimed that coalition discussions
are still ongoing. The only other viable possibility, a
grand unity "government" involving both CTP and UBP, floated
as possible by some of the protesting labor unions, seems
highly unlikely given the many ideological differences
between the two parties.


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

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9. (C) CTP is clearly playing for time, staggering on until
after Turkish politics beocmes clearer after Turkey's July 22
elecions. Its alliance with the opportunistic OP allowed CTP
greater flexibilty in forming policy -- particuarly on
"public sector" reform and a Cyprus solution -- than it had
in its previous coalition with DP (ref B). The cost that
came with this increased flexibilty, however, has come at an
inconvenient time; with little progress in Cyprus
negotiations, CTP is in the uncomfortable position of either
having to place itself back in a restrictive alliance with DP
or going to the polls under a shroud of
"guilt-by-association" with the corrupt OP.



10. (C) Making the situation more difficult is the
atmosphere created by the Turkish elections. Neither CTP nor
Turkey's governing Justice and Development Party (AKP) wanted
Cyprus to become a campaign issue in Turkey, thereby
enflaming anti-solution nationalist sentiments just before
the polls. According to Deniz, many believe that Erdogan
explicitly instructed the CTP to maintain the status quo
until after July 22, a belief consistent with how political
events have unrolled. If CTP can reclaim the initiative
during the summer, settle a clean divorce from OP, and
install a workable "government," it may yet emerge from the
OP scandal mostly unscathed. Much will depend, though, on
the willingness of the opposition players to cooperate. The
difficulties in the CTP-UBP-DP negotiations may be the result
of the parties jockeying for position for when the Turkish
political logjam breaks. There is the risk, however, that
the jockeying may take on a momentum of its own, poisoning
the atmosphere even after Turkey's elections. If negotiations
falter, CTP may be forced to maintain the status quo through
the summer recess and, then, open the next "legislaive" year
staggering toward a possible no-confidence vote and early
elections. Both these scenarios would make significant
progress on the UN track even more difficult to broker.


SCHLICHER