CYPRUS: SOLUTION TALKS' FIRST-READING CONCLUDES,

C O N F I D E N T I A L SECTION 01 OF 05 NICOSIA 000533

SIPDIS

DEPT FOR EUR/SE

E.O. 12958: DECL: 08/07/2019
TAGS: PREL PGOV UNFICYP TR CY
SUBJECT: CYPRUS: SOLUTION TALKS' FIRST-READING CONCLUDES,
UNSYG SA DOWNER AND LEADERS "CAUTIOUSLY OPTIMISTIC"

REF: A. AUGUST 4 PANICO-NETOS E-MAIL

B. AUGUST 5 PANICO-NETOS E-MAIL

C. AUGUST 6 PANICO-NETOS E-MAIL

Classified By: CDA Jonathan Cohen for reasons 1.4(b) and 1.4(d)


1. (C) Summary: "I am still cautiously optimistic" UNSYG
Special Adviser Alexander Downer told the Charg on August 6,
hours after the end of the first reading of UN-brokered
negotiations between Greek Cypriots (G/C) and Turkish
Cypriots (T/C) that commenced in September 2008. Downer
previewed his expectations for the second reading, set to
start on September 3, with seven meetings scheduled through
October 2. G/C leader Demetris Christofias and T/C leader
Mehmet Ali Talat, he said, plan to tackle the election of the
executive (governance),then move to property, while their
representatives deal with ancillary issues. If convergence
could be achieved in these two chapters, he said, then the
economy and EU affairs chapters should "fall into place."
The discussion of territory, however, would be a "very bloody
affair", he warned, and Turkey would insist on retaining some
kind of intervention rights under the Treaty of Guarantee.
Overall, he believed the sides had a common vision of a
post-solution Cyprus--a "small and weak" federal government
with two robust constituent states--but could not yet admit
this. Downer has urged both leaders to stop "wasting time"
on "history lessons" and urged them to put a "positive public
spin" on their efforts, which both did in their public
remarks that day. Downer has"cautious optimism" in the
leaders' ability to conjure a "yes" vote from their
respective communities in eventual referenda, but warned that
implementation of a solution would bring "crisis after
crisis" and urged the USG to start preparing itself for this
possibility.


2. (C) Summary Continued: Downer, who on August 5 had
summoned the UK and U.S. Chargs to help calm a nasty dust-up
regarding the road route of the Limnitis/Yesilirmak crossing
point (Ref E-Mails),thanked the Embassy for its
intervention, adding that the process had been "absolutely on
the edge" for a couple of days. He said the best role for the
U.S. in the next phase would be to continue to publicly
support the process and to remain available to intervene with
the sides when they or the UN request it--as in the case of
Limnitis. End Summary

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Focus on Governance and Property in Second Reading
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3. (C) Downer told the Charg he hoped that the second
reading, set to commence on September 3, would move much
faster than the 11-month first reading, which witnessed forty
meetings between Talat and Christofias. He said that while
there were still organizational matters to discuss on
September 3, the leaders had agreed to focus the second
reading first on governance and power sharing (election of
the executive),then move to property. For their part, the
two lead negotiators, George Iacovou and Ozdil Nami, will
work on ancillary issues, and Downer hopes that the two can
get the leaders to sign on to their ad referendum agreements
prior to the leaders' meetings, thus allowing things to be
done more quickly and efficiently. (Note: In the first
reading, agreements were only made at the leaders' meetings,
which often dragged Christofias and Talat into weedy details
with which they were unfamiliar. End Note) He said that Nami
had told him that the T/Cs would table a new proposal on
governance early on, which Downer thought might be the
abandonment of the Annan-era "Presidential Council" model in
favor of a Presidential/Vice-Presidential system, the G/C
position.


4. (C) Downer believes that the key to solving the property
issue was a common law vice civil law approach. Common law,
he said, combines the notions of precedent, statute, and,
most importantly, justice for the occupant as well as for the
original owner. Downer said that if the parties only use a
civil law approach, as the EU (with the exception of the UK)
generally does, they will be guided solely by statute and
code and will never find a solution acceptable to the T/Cs.


5. (C) He was especially ebullient over his U.S. property
lawyer, Jeff Bates, and complained about his previous
property expert, a pleasant, if civil law-bound, EU
bureaucrat. (Note: The UN facilitator for the Economic
Working Group told us that Bates proposed a plan monetizing

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the appreciated value of GC-owned property in the north from
its 1974 level. This appreciated value would become a
security that could then be sold in the market by either the
current occupant (if he were forced to move) or the GC-owner
(if he gave up his property rights). As the facilitator
noted, however, this does not solve the political question of
who would have the right of first refusal, with the G/Cs
insisting on the original owner, and the T/Cs demanding
adjudication by an independent property board acting
according to mutually agreed principles. End Note).


6. (C) Downer said that if the T/Cs are reassured that their
equities in the federal executive will be protected, they
will back away from insisting on many constituent state
competencies and numeral equality in many federal bodies,
opening up opportunities for deal making with the G/Cs. He
added that if agreement could be achieved in these two
chapters--the "biggest challenge" of the second reading--then
issues like the economy and EU affairs, on which he claimed
there was already much convergence, would "fall into place."
The sides, he added, planned to skip over the presently
intractable "territory" and "security and guarantees"
chapters until the final "give-and-take phase."

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Territory Chapter--"Very Bloody Affair"
--------------


7. (C) Downer said that the debate on territory would be a
"very bloody affair." He said that while the T/Cs and the
Turkish Cypriots (with the support of the Turkish military)
are prepared to give up the abandoned, fenced-off city of
Varosha, the return of the Karpaz/Karpas peninsula, another
G/C demand that was not achieved in the Annan Plan, was a
non-starter. (Comment: According to the UN Facilitator for
the Territory Working Group, the T/Cs argued that the
post-Annan building boom in the north drastically reduced
open space needed for resettlement; consequently, any
large-scale territorial give-backs would result in a
"humanitarian" crisis. Such logic, he added, infuriated the
G/Cs who saw a "moral equivalency" with their own 1974
displacement and wanted as many G/Cs to return under G/C
administration as possible. A Talat adviser told us that
Turkey is against the return of the Karpaz/Karpas peninsula.
He added that the Turkish Cypriots also do not favor the
return of Karpaz/Karpas, but were at least willing to discuss
it. End Note)

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Turks might modify Treaty of Guarantee, Not Abandon it
-------------- --------------

8.(C) Downer thought that Turkey might modify its unilateral
right of intervention under the Treaty of Guarantee to
accommodate the new post-solution state of affairs, but
doubted that Ankara would abandon it. (Note: His assessment
tracks with everything we have heard from Turks and Turkish
Cypriots, including polling. However, Christofias has
passionately appealed to terminate the unilateral guarantees,
either outright or by making them multilateral by including
the UN or the EU. End Note). Greece would support the G/C
position, including if it evolves. He thought that the UK,
which has been largely silent on the issue, would "go along
for the ride", but assumed London would also maintain its
guarantor status. In response to the Charge's question
regarding when to involve the three guarantor powers
(UK/Turkey/Greece) in the process, Downer skirted the issue,
replying only that "they did not necessarily need to be in
the room" at any point.

--------------
"Settler" issue appears to loses its urgency
--------------


9. (C) Downer said that the "life" is going out of the
"settlers" issue, short-hand for Turkish citizens who moved
to the north post-July 1974 and are considered "illegal" by
the RoC. (Note: The G/Cs fought unsuccessfully to make this a
stand-alone negotiating chapter, but settled for its
inclusion under "governance and power sharing." End Note) He
said that Christofias, who even before the start of the
preliminary negotiations had accepted the presence of 50,000
"settlers," was clearly trying to find modalities to solve
the issue. He said that the sides had agreed to exchange
information on population at their August 6 meeting. Downer
said the possibility of offering a 10,000 Euro repatriation

NICOSIA 00000533 003 OF 005


payment was being discussed as a vehicle to encourage anyone
above the 50,000 to return to Turkey. He added that the G/Cs
understood there could be no forced repatriation and was
confident that sides could find an accommodation. (Note:
Leonidas Pantelidas, the head of Christofias' Diplomatic
Office, expressed similar, moderate sentiments to Embassy
Officers on August 6. Nami and Talat, both publicly and
privately, have said that all "TRNC" citizens would stay
post-settlement. According to the 2006 T/C census, there are
about 178,000 "TRNC citizens", of whom 120,007 had both
parents born in Cyprus and might otherwise be considered RoC
citizens. Under the Annan Plan, the Turkish Cypriots could
not fill a quota of 45,000 settlers and came up only with
around 42,000 names. Nami, however, told us that the 42,000
did not include those born in the north who would otherwise
not be considered RoC citizens, i.e. children of a "settler"
family. End Note).

-------------- --------------
Post-Solution Cyprus: "Small and weak" federal government
-------------- --------------


10. (C) Downer said that the sides shared a "realistic"
vision of post-solution Cyprus, with, at least initially, a
"small and weak" federal government. Most functions, he said,
would be conducted in the two constituent states. He noted
that the "weakness" of the central government would be
necessitated by limited federal revenue based solely on
value-added tax, half of which would go to shore up the
constituent states. He said that the sides "basically agreed"
with each other, but were loath to admit this publicly.
(Comment: If accurate, Downer's assessment represents real
progress. The G/Cs have traditionally, including hitherto in
this round of negotiations and loudly in the press, fought
for a strong federal government and dismissed anything less
as unacceptably "confederal". Downer's Canadian governance
expert foreshadowed this, telling us that the two
communities, like French and English speakers in Quebec,
would most likely end up living in "two solitudes"
post-solution, at least initially. End Comment).

--------------
No history lessons, Accentuate the Positive
--------------


11. (C) Downer said that he told both leaders to "stop
wasting" time at the Leaders' meetings over interminable and
divisive historical debates on which they would never agree
and urged them to put a "positive" spin on the talks in their
public comments. Downer said that Christofias, whom he has
characterized as "not robust" and surprisingly "sensitive to
criticism" for a seasoned politician, had complained to him
that every time he "utters something positive" the G/C
"rejectionists" attack him. Downer had been unable with
either Iacovou or Christofias to determine what public
relations strategy would best help them politically.
Consequently, Downer said Christofias' negativity was either
meant to muffle domestic critics or as a negotiating tactic
to pressure the T/Cs. He did not agree with Nami's theory,
related by the Charg, that Christofias disliked the present
process because he believed the result would resemble the
Annan plan and would consequently be "unsellable" to the
G/Cs. Downer, however, was heartened by Christofias' August 6
statement when, for the first time in months, the G/C leader
voiced "cautious optimism" and admitted that there had indeed
been some progress in the first round.

--------------
Going forward
--------------


12. (C) Downer repeated that he was "cautiously optimistic"
about the prospects for the rest of the talks and for
eventual referenda. He noted that the job of selling the deal
in the run-up to the referenda clearly belonged to the
leaders, not the UN Good Offices Mission. He dubbed the
implementation of a solution a "massive job" that would bring
"crisis after crisis" and warned us to be prepared. The
Charg responded that we were aware of the task and had
already started to figure this equation into our Mission
strategic planning. Downer was unhappy that the Ambassador
had raised with U/SYG Lynn Pascoe during their July 31
meeting the need for Downer to spend more time on the island,
claiming that this had put him under "enormous pressure." The
Charg responded that in the next phase there would be an
increasing number of problems that only Downer could resolve

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and that the atmospherics were better on both sides when he
was here. Downer said he would return for the first two
leaders meetings (September 3 and 10) and then planned to be
around "for most of October and November" for the end of the
second reading and for the start of the purported "give and
take" phase.

--------------
Limnitis/Yesilirmak Road Crisis Subsides...
--------------


13. (C) Downer thanked the Charg for the Embassy's
"incredible help" in calming the sides the previous day
regarding the Limnitis/Yesilirmak road route dispute per Ref
E-Mails. He said the talks had been "on the edge of
collapse" for a couple of days; with the G/Cs calling foul
and pushing back fiercely over a T/C proposal to change the
route of the road for the crossing point by 200 meters to
avoid a small military armory and camp. The G/Cs, he said,
feared that this would cause a delay that would leave them
vulnerable to rejectionists criticism. He said he tried to
get the sides to agree at the August 6 Leaders' meeting to
setting time limits for the construction project based on a
planned feasibility study. Christofias was accommodating on
everything regarding the Limnitis/Yesilirmak opening,
including the time limit proposal, but would not, at least
officially, budge on the T/C proposal to change the route.


14. (C) Downer added that the route change was clearly
mandated by the Turkish Army to avoid civilian traffic
passing next to the aforementioned Turkish military armory
(part of a small base) astride the existing road. He
dismissed as "pure rot" Nami's contention that the new route
would be cheaper or quicker to implement, but said that in
any case the "talks would either 'crash and burn' or be
successful" before the road work could be completed. The
important thing was to get it started quickly. Downer said
that he met with Turkish Forces Commander Lt. General Hilmi
Akin Zorlu, who made no secret of the fact that the road
route change was a military demand. Downer told Zorlu that he
needs "peace and quiet" going into the next phase of the
talks and that Zorlu, with whom Downer said he had developed
a good rapport based in part on their experiences in
Afghanistan, responded "positively" without going into detail.

-------------- -
...With Possible Compromise Feasibility Tender
-------------- -


15. (C) UNFICYP DCM Wlodek Cibor told Poloff on August 11
that a August 10 trip by Nami and Iacovou to inspect the
crossing point and proposed routes had "gone quiet well"
(Cibor and UNFICYP Head Taye-Brook Zerihoun accompanied the
group). Cibor said that a feasibility study draft tender had
been given to the sides; if they approve, the tender
announcement would be on the street this week, with a bid
awarded by mid-September. To sweeten the deal for both sides,
the draft tender proposal reduces the deadline for the study
from eleven to eight weeks, while including the requirement
of "possible construction" along with reconstruction,
indicating that the road may take the new T/C proposed route.
Cibor agreed that the issue had calmed for the present and
that the G/Cs, who want the road finished as soon as
possible, would not risk delays by further fighting or
carping at this stage. Cibor added that he had "no doubt"
that the new, proposed route would take longer to construct
since part of it will be built from scratch, whereas the old
route already has a narrow, hard-pack dirt road with some
tarmac in places. He also hoped that the land in question
proved to be T/C or state land, not private G/C holdings.
Nami, he said, assured Iacovou it was state land.



16. (C) Comment: The first reading lasted longer and proved
harder than either leader and most observers expected. Both
leaders were surprised and frustrated by the divergences on
key issues and on a general lack of flexibility in the first
round. They learned a lot about the shortcomings of the
process they created, including the self-imposed need to find
solutions with minimal, though often important, ad hoc input
from outside experts. Most importantly, the leaders stuck at
it despite bumps in the road. Downer has proven a steady
hand and one that will be needed more frequently as the sides
get jittery giving up old, untenable positions--as they must
do if the there is to be a solution. He has also proven adept
at understanding the challenging local political environment

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that confronts both of the leaders every day. For the
moment, the key will be, as Downer told Zorlu, to keep things
calm and quiet till the talks recommence on September 3. End
Comment.







Cohen