Identifier
Created
Classification
Origin
08NICOSIA426
2008-06-05 14:01:00
CONFIDENTIAL
Embassy Nicosia
Cable title:  

GREEK CYPRIOTS DROP EU ASSISTANCE LAWSUITS

Tags:  PGOV PREL EAID ECON CY TU 
pdf how-to read a cable
P 051401Z JUN 08
FM AMEMBASSY NICOSIA
TO SECSTATE WASHDC PRIORITY 8847
INFO EUROPEAN POLITICAL COLLECTIVE
USMISSION USUN NEW YORK 
USEU BRUSSELS
C O N F I D E N T I A L NICOSIA 000426 


SIPDIS

DEPARTMENT FOR EUR/SE, EUR/ERA

E.O. 12958: DECL: 06/05/2023
TAGS: PGOV PREL EAID ECON CY TU
SUBJECT: GREEK CYPRIOTS DROP EU ASSISTANCE LAWSUITS

Classified By: Ambassador Ronald Schlicher, Reasons 1.4 (b),(d)

C O N F I D E N T I A L NICOSIA 000426


SIPDIS

DEPARTMENT FOR EUR/SE, EUR/ERA

E.O. 12958: DECL: 06/05/2023
TAGS: PGOV PREL EAID ECON CY TU
SUBJECT: GREEK CYPRIOTS DROP EU ASSISTANCE LAWSUITS

Classified By: Ambassador Ronald Schlicher, Reasons 1.4 (b),(d)


1. (C) SUMMARY: Citing its satisfaction with a compromise
reached days earlier, the Republic of Cyprus on June 3
announced the withdrawal of eight appeals to the European
Court of Justice (ECJ) over tenders originating in the
European Union's 259-million euro financial aid package for
Turkish Cypriots. In thw waning weeks of the Tassos
Papadopoulos administration, the RoC had filed the suits over
perceived "TRNC" recognition issues; the legal campaign had
angered T/Cs and was threatening the improving bi-communal
climate that accompanied RoC President Demetris Christofias's
February election. Government officials claim the RoC now
will endeavor to see the assistance program swiftly and fully
implemented, and T/C reactions to the G/C move generally
sounded gracious and mild. Two factors likely underpinned
the RoC decision to end the appeals: the realization the
cases were weak and doomed to fail, and the associated desire
to regain the high road via a "gesture of goodwill."
Christofias might have generated even greater goodwill by
withdrawing the cases earlier, but domestic political
considerations likely kept him from moving too fast. END
SUMMARY

--------------
Calling off the Dogs
--------------


2. (U) Government Spokesman Stephanos Stephanou announced on
June 3 that the RoC had dropped ECJ proceedings against eight
tenders totaling 10 million euro, part of the EU's
259-million euro "Financial Aid Regulation to the Turkish
Cypriot Community." Six cases were initially brought during
the final month of the Tassos Papadopoulos administration --
and two more filed after Christofias took office -- because
of G/Cs' objection to wording in the tenders and the
necessity of interacting with T/C "customs authorities" in
ensuring duty-free import of project goods and services. In
his statement, Stephanou asserted that the European
Commission had deleted all textual references that equated
the T/C community to a "third country" eligible for financial

aid. He also noted that the amended text clarified that the
Turkish Cypriot-administered area was treated as sovereign
RoC territory under Cyprus's 2003 EU accession treaty.

-------------- --------------
Aid Program Long a Source of Inter-Communal Friction
-------------- --------------


3. (SBU) In April 2004, shortly before the island joined the
European Union, the Commission proposed an assistance package
for Turkish Cypriots featuring trade and financial aid
elements. Greek Cypriot rejection of "direct trade" on
recognition grounds forced Brussels to de-couple trade from
aid, and the former has gone nowhere owing to G/Cs' continued
opposition. Nicosia similarly blocked the 259 million euro
aid package for nearly two years, until deciding in February
2006 to renege, with caveats (infrastructure projects are
especially difficult, since approximately 80 percent of land
in the T/C community is Greek-owned.) In the two years
since, the tendering and awarding of contracts has proceeded
at a glacial pace, however, and most aid experts believe the
Commission will not succeed in spending fully the allotted
funds.


4. (C) Alain Botherel, who heads the Commission's assistance
office in north Nicosia, hinted at upcoming troubles in a
January 30 meeting with Embassy officers. He revealed how
then-RoC Foreign Minister Erato Marcoullis had just sent him
a harshly-worded letter that focused on the Commission's
tenders referring to the T/C-administered area as a "third
country;" she urged the office not to proceed. "We need to
be more cautious," Botherel admitted, adding that his staff
would rework the wording slightly. On February 4, however,
the RoC filed the first of several tenders-related suits at
the ECJ; the last two were lodged in mid-March, after the
pro-solution Christofias had succeeded the hard-line
Papadopoulos. News of the lawsuits generated little reaction
with G/Cs but spawned great anger amongst Turkish Cypriots.
"We thought there would be no more cases after the change in
administration in the 'south,' but now there are two new
cases," growled "TRNC Prime Minister" Ferdi Soyer on March 27.

--------------
Success at Slowing the Process
--------------


5. (C) Bothorel, in a follow-up meeting May 19, again raised
the Commission's willingness to address RoC concerns, noting
it had already changed text objectionable to Greek Cypriots.
That said, he was certain the RoC would not win the ECJ
cases, and was not surprised the Court of First Instance of
the European Communities on April 12 had rejected an RoC
motion to stop work on the tenders until the ECJ had heard
the cases, purportedly in 2009. The lawsuits had resulted in
the Commission losing two-and-a-half months of valuable time,
however. "If the G/C intention was to slow down the process,
they have done it," Bothorel complained. On a brighter note,
his office had been able to launch tenders worth 100 million
euro, and 45 million in projects had been signed. While
hoping to award the full 259 million by the end of 2008,
Botherel acknowledged that continuing property concerns would
make that nigh-impossible.


6. (C) In May, several signs pointed to a compromise that
would allow the EU tendering process to continue. First and
foremost, both communities were hailing the progress of the
working group on EU matters, calling it -- along with the
Economic WG -- the star performer. Constantinos Lycourgos,
the head of the European Union section in the Attorney
General's office, informed us May 5 that Cyprus had reached
"an understanding" with the Commission on revising the
tenders language. Finally, the Embassy's UNFICYP contacts
surmise that Turkish Cypriot leader Mehmet Ali Talat likely
raised the matter with Christofias during the tete-a-tete
portion of their May 23 meeting, receiving the answer he had
wanted.

--------------
No Brownie Points, No Grudges
--------------


7. (SBU) The Republic intended to work closely with its
Commission counterparts to ensure the EU assistance program
was implemented quickly and fully, claimed Andrea Petranyi in
the MFA's Cyprus Question division on June 4. The "brief"
delay the lawsuits had caused seemed easily overcome, she
ventured. Petranyi revealed that President Christofias
himself had ordered the cases' termination as a goodwill
offer to Turkish Cypriots, once the MFA had chopped on the
Commission's amended tender language. Asked why, if
Christofias had hoped to curry T/C favor, there were two new
cases filed in March, Petranyi echoed the explanation that
lawyer Lycourgos offered us the same day; had Cyprus not
opened the new cases -- "for consistency's sake" -- their
legal arguments before the ECJ would have been weakened.


8. (U) Turkish Cypriots generally have responded positively
to the G/C decision. "TRNC Presidential Spokesman" Hasan
Ercakica saw nothing disturbing for the T/C side in the
amended Commission-RoC text, while "PM" Soyer, who earlier
had claimed the cases fanned enmity between the communities,
called their withdrawal a "belated, positive step."
Pro-solution daily "Kibris," the north's leading daily, on
June 4 trumpeted "FROM THE SOUTH, A GESTURE OF GOOD WILL."
The other two influential dailies, nationalist "Halkin Sesi"
and CTP party mouthpiece "Yeni Duzen," were silent.


9. (C) Close Embassy contact Erhan Ercin had a different
take on G/C motives, however. The T/Cs' European Union
Coordination Center chief and head of their EU working group,
Ercin told us June 4 that the RoC had pulled the cases not
for altruistic/goodwill reasons, but because they had lost in
the lower court in April. In the meantime, the vitally
needed projects had suffered a long delay. He dismissed the
G/C decision as a "showy face-saving attempt."

--------------
Comment
--------------


10. (C) Forgive us our Cyprus Problem cynicism, but
unilateral goodwill gestures come less often than leap years.
More likely, the Republic's army of lawyers arrived at the
same conclusion as EU chief Botherel had, especially after
the Court of First Instance's interim decision in April: the
cases were unwinnable. Since Christofias and FM Markos
Kyprianou had been broadly hinting from their first days in
office that they wanted a face-saving way to make the cases
disappear, the adverse interim verdict may have created a
domestic political momement wherein Christofias could reach
an acceptable compromise over text and sensibly declare
victory. Had the President pulled the cases too early in his
tenure, before the working group/technical committee process
had gotten underway, he likely would have received immediate
criticism from the nationalists for giving without getting.
Regardless of motives or timing, however, Christofias made
the right choice. And the T/C response, while not exactly
magnanimous, avoided the unproductive, "they should have done
this long ago" refrains we often hear.


11. (SBU) The EU program on Cyprus represents Brussels's
highest per capita assistance package (1000 euro/resident)
and, like the USG effort, aims to reduce the costs to Greek
Cypriots of a final settlement. With the tenders compromise
reached, the Commission can begin work on some essential
infrastructure upgrades (such as removal of asbestos pipes in
city water systems) and the studies necessary to begin
tackling the island's many environmental issues. The
Commission's next challenge will be overcoming Turkish
Cypriot demands for preferential treatment in the awarding of
the actual tenders, and likely T/C bellyaching that the aid
amounts aren't enough.

SCHLICHER