CYPRUS: DENKTASH SCION A RELUCTANT KINGMAKER IN

C O N F I D E N T I A L SECTION 01 OF 02 NICOSIA 000233 SIPDIS DEPT FOR EUR/SE E.O. 12958: DECL: 03/27/2019 TAGS: PREL PGOV TR CY SUBJECT: CYPRUS: DENKTASH SCION A RELUCTANT KINGMAKER IN T/C ELECTIONS REF: A. NICOSIA 186 ¶B. NICOSIA 199 Classified By: Ambassador Frank C. Urbancic for reasons 1.4(b) and 1.4( d) ¶1. (C) Summary: Denktash family scion and Democrat Party (DP) leader Serdar Denktash believes his center-right party, the perennial junior coalition partner in Turkish Cypriot (T/C) politics, may once again play that role after April 19 "parliamentary" elections. Nevertheless, the second son of long-time T/C leader Rauf Denktash is reluctant to enter into a coalition with either of his two most likely partners, the National Unity Party (UBP) or the Republican Turkish Party (CTP),because of personal disdain for their respective leaders. In a recent meeting with Embassy staff, Denktash voiced support for the negotiation efforts of T/C leader Mehmet Ali Talat despite his total lack of confidence in the process. The DP leader said that the current elections likely would not produce a "government" able to tackle the north's main ailment, a weak economy plagued by an inefficient and bloated public sector, meaning further political instability might soon follow. Whether Turkey's AKP, with whom the Denktash family has openly feuded, would approve of any member of the family returning to power is an open question. End Summary. -------------- DP aiming for number-two spot -------------- ¶2. (C) In a March 17 meeting with Embassy officers, Serdar Denktash was confident that DP, a hodgepodge of free market businessmen and Denktash family stalwarts, would emerge as the number-two T/C party in a very close "parliamentary" race with CTP and UBP in April 19 elections. He thought DP might even double its 13.5 percent haul in 2005 elections, thanks to anger at CTP and voter hesitancy over the possible return of Dervish Eroglu, the old guard UBP leader (DP garnered around 13.5 in a recent poll, as indicated in Ref A.) Denktash added that his father, beloved by hard-liners and older voters, was actively campaigning for him for the first time. Others in the party shared his optimism. Ertugrul Hasipoglu, Denktash's number-two, told us on March 18 that DP would capitalize on undecided voters and might obtain 25 percent, its take in 2006 local elections. -------------- "We need to stand on our own two feet" -------------- ¶3. (C) Denktash hopes to lure voters and win Turkey's support with a program of free market reforms to shrink the bloated, inefficient public sector and energize the private sector -- key goals of Ankara as well. Mustafa Arabacioglu, DP's candidate in 2005 "Presidential" elections, told us on March 19 that the Turkish Cypriots needed to stand on their own two feet. He lamented that generous Turkish aid, which amounts to about USD400 million per annum and compromises just under one-quarter of the "TRNC" budget, would simply be wasted on imported goods, absent serious reforms. Denktash -- in a line oft-repeated by the previous Turkish "Ambassador" here -- said the only way to force Greek Cypriots to accept a settlement would be to increase de facto T/C autonomy by placing the economy and public sector on a sustainable footing. ¶4. (SBU) In the current elections, DP proposes an initial program of tax cutting and fee reduction on businesses to stimulate the economy, which has been in recession for the past 18 months. In a sop to the Rauf Denktash loyalists, however, the party also wants to change banking regulations so that non-Turkish Cypriot-titled land can be used as collateral for loans (at present, although there is no outright prohibition, banks in the north do not give credit against original GC-titled property.) Hasipoglu added that DP would be reluctant to enter a coalition whose members did not share this reformist zeal. -------------- "Nothing Happening in Talks" -------------- ¶5. (C) Denktash, who enjoys a close personal relationship with Talat stemming from their cooperation during the Annan Plan, voiced support for the T/C leader's negotiating efforts despite overall skepticism over its eventual success and NICOSIA 00000233 002 OF 002 disagreements over certain issues, such as Talat's acceptance of "single sovereignty" for the unified state (many T/Cs, including DP, favor a common sovereignty that emanates from the constituent states.) He joked that his concern over issues like sovereignty probably were moot, since "nothing is happening in the talks now." However, as long as Turkey supported a solution -- and by all intents it did, Denktash thought -- the outcome of the April 19 elections would not substantially alter the present pro-solution T/C course. -------------- "Maybe better outside of 'government'" -------------- ¶6. (C) Despite confidence in a second-place DP showing, Denktash evoked no real desire to join a new coalition. He said that Eroglu, the UBP leader, was "hard to work with" and, after being dumped once by CTP, he was skeptical of the Ferdi Soyer-led party. Nevertheless, he thought CTP and Soyer had learned their lessons over the past five years and were more likely to enact reforms, albeit limited, palatable to his party. Eroglu, on the other hand, "was the original criminal" who, along with UBP, had created the present dysfunctional system in the north. Denktash saw DP's choice as either supporting a UBP-led minority "government" or watching the "antics" of a grand UBP-CTP coalition from the sidelines. He predicted that no strong "government," i.e., one capable of conducting desperately needed but painful structural reforms, would emerge on April 19. Consequently, subsequent political instability in the north might again force early elections within a couple of years. -------------- Comment -------------- ¶7. (C) Given that the Denktash family name alone is worth 10 percent in northern Cyprus, Serdar's boasting of a strong DP showing seems possible. Whether he will obtain second-place status is harder to gauge. Denktash may also be exaggerating his reticence to enter a new coalition, since DP, lately bereft of its ability to dole out favors and thus riven with defections, has paid dearly for its time in opposition. As for Turkey, AKP and PM Erdogan -- with whom the Denktashes have publicly feuded -- may not look kindly on a return to power for the family. Denktash has said as much, complaining that AKP was still working against him and his party. Urbancic