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C O N F I D E N T I A L NICOSIA 000121 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 01/17/2016 
TAGS: PREL PGOV PHUM CY
SUBJECT: NORTH AND SOUTH:  CYPRUS DESK OFFICER MELLINGER'S 
JANUARY 11-13 VISIT TO CYPRUS 
 
 
Classified By: Ambassador Ronald L. Schlicher; Reasons 
1.4 (b) and (d) 
 
¶1.  (C)  Summary.  Cyprus Desk Officer Elise Mellinger 
visited Nicosia January 11-13 and met with political leaders, 
businessmen, and academics on both sides of the Green Line to 
discuss the Cyprus issue, possible confidence building 
measures including the Ledra Street crossing, efforts to 
promote on-island trade and progress in combating Trafficking 
in Persons (TIP).  Both her Greek Cypriot and Turkish Cypriot 
interlocutors were skeptical about the immediate prospects 
for restarting negotiations, particularly since the prospect 
of Parliamentary elections in May on the Greek Cypriot side 
were sucking up most of the political oxygen in the south. 
The Greek Cypriots with whom Mellinger met were looking to 
cast the finger of blame for the current political stalemate 
at Turkey and the Turkish Cypriot side.  Mellinger's Turkish 
Cypriot interlocutors, meanwhile, stressed familiar themes of 
frustration over Greek Cypriot "intransigence."  Turkish 
Cypriots were looking to third parties to lay the ground for 
productive talks by "pressuring" the Greek Cypriots, 
including through further steps to ease Turkish Cypriot 
isolation.  Deputy UNFICYP head Susan Allee suggested that 
the leadership on both sides had hardened their positions. 
On TIP, Mellinger saw little evidence that either side was 
making good on earlier commitments to take firm action to 
combat trafficking and punish traffickers.  End summary. 
 
Greek Cypriots Pointing the Finger of Blame... 
--------------------------------------------- - 
 
¶2.  (C)  Ambassador Erato Marcoullis, Director of the Cyprus 
Question and EU Affairs Division at the MFA, offered 
Mellinger an exposition on the island's demographic 
composition and its significance for the Cyprus issue.  Prior 
to 1974, she commented, the Turkish Cypriot community had 
been scattered evenly across the island.  Bizonality, 
therefore, represented a historic concession on the part of 
Greek Cypriots, one that needed to be factored into the 
balance of a satisfactory plan.  In finalizing Annan IV, the 
UNSYG used his arbitration authority to satisfy all Turkish 
and Turkish Cypriot concerns, while -- according to 
Marcoullis -- "no Greek Cypriot concerns were accounted for." 
 For any future negotiations, she stressed "the need for 
agreement, rather than imposition by the UNSYG."  This is why 
the Greek Cypriots required acceptance of certain procedural 
conditions in advance of further talks:  1) a reasonable and 
flexible time schedule that was neither restricted nor 
open-ended, 2) no arbitration, and 3) only a solution agreed 
upon by both leaders can be put to referenda.  When we 
pressed for a clearer sense of what a "reasonable and 
constructive time schedule" might look like in practice, 
Marcoullis hedged.  The "time frame should be open ended, but 
not asphyxiating," she offered somewhat ambiguously, adding 
that "such things would be decided when the time comes." 
Marcoullis maintained that Ankara was the main obstacle to a 
resolution of the Cyprus issue.  She stated that "Turkey must 
get out of the equation" of the negotiations.  She assured us 
that "the Greek Cypriots want Turkey to have a smooth path to 
accession," but "unless Turkey sends signals to the UN 
regarding its willingness to give ground, Ankara faces no 
future in the EU."  On the off chance that we missed the 
point, Marcoullis concluded, "Cyprus will make it very 
difficult for Turkey's future in the EU." 
 
¶3.  (C)  AKEL's head of international relations Andros 
Kyprianou stressed his personal disappointment with AKEL's 
souring relations with the north's ruling CTP party and the 
Turkish Cypriot left's new-found preference for the 
right-leaning Greek Cypriot DISY party.  The blame for this 
development, of course, he laid solely on Mehmet Ali Talat 
and the CTP leadership.  When asked if AKEL's rejection of 
the referendum may have fundamentally affected the Turkish 
Cypriot view of the party, Kyprianou stressed that the 
Turkish Cypriot working-class remained largely supportive of 
AKEL.  The problem was with the leadership rather than the 
rank-and-file.  Despite this, the AKEL-CTP dialogue would 
continue and Kyprianou had hopes that it would produce 
positive results.  The next meeting would address power 
sharing and governance under a solution.  If AKEL and CTP can 
find common ground on changes to the Annan Plan, Kyprianou 
believed that this could serve as the basis for renewed 
negotiations in more formal, UN-sponsored channels. 
Meanwhile, AKEL was focused on the upcoming parliamentary 
elections and expected to hold its position as the largest 
party by percentage of vote. The results of the November 
party congress had been positive, but AKEL had some serious 
challenges ahead.  Kyprianou indicated he would be quite 
satisfied with 32 percent of the vote. 
 
...But That Shouldn't Get in the Way of Business 
--------------------------------------------- --- 
 
¶4.  (C)  Recently elected Greek Cypriot Chamber of Commerce 
(KEVE) President Manthos Mavromatis stressed the importance 
of "making a new start" on intra-island trade as there was 
now new Chamber of Commerce leadership on both sides of the 
Green Line.  KEVE's goal was to increase trade between the 
north and the south without politicizing the mission. He 
believed that creating "common economic interests for 
stakeholders" with less protectionism on both sides of the 
Green Line would be critical.  Econoff suggested that 
Mavromatis look into reviving discussions that took place in 
late 2005 with the Supermarket Associations of the north and 
south on the placement of Greek Cypriot and Turkish Cypriot 
goods on each others' shelves.  Mavromatis agreed that this 
was a good idea and agreed to explore it further. Turning to 
the Cypriot economy, Mavromatis highlighted the ROC's 
exceptional economic performance in 2005, with a four percent 
growth rate and low inflation, despite the high price of oil. 
 Given the overall economic climate, KEVE was fully 
supportive of the ROC's goal of EMU membership by January 
¶2008. Mavromatis admitted that structural weaknesses still 
existed within the Cypriot economy, but believes that many of 
these would be corrected over time as Nicosia broadened its 
participates in the EU,s Lisbon process.  The Cypriot 
economy could also be improved by government spending on more 
research and development projects.  This would better utilize 
Cyprus' highly skilled labor force and create more attractive 
and diverse tourism products and services.  The ultimate goal 
would be to attract a greater number of high income tourists 
through the development of casinos, golf courses, and 
marinas. 
 
 
UN Assessment: Both Sides Taking a Harder Line 
--------------------------------------------- - 
 
¶5.  (C) Deputy Head of UNFICYP Susan Allee was skeptical that 
UN-led talks would resume in the near future. Leaders on both 
sides were increasingly dug-in and uncompromising.  The 
controversial views on the Annan Plan that Presidential 
Diplomatic Advisor Tasos Tzionis had offered in an interview 
in November highlighted the hardening of the Greek Cypriot 
position -- and might represent a rejection of the 
long-standing goal of a bizonal, bicommunal, federal 
solution.  By the same token, the Turkish Cypriots were 
becoming less flexible as their strategy of "trying to win 
friends and influence people" had not produced the results 
they were hoping for.  From the Greek Cypriot perspective, 
the Turkish Cypriot agitation for an "end to their isolation" 
looked like a ploy to elevate the status of the "TRNC."  New 
UN Chief of Mission Moller, in his initial meetings on both 
sides, would try to shift the focus of dialogue between the 
two sides toward achievable confidence building measures. 
The controversy over the opening of a new checkpoint at Ledra 
Street was one issue on which the UN felt movement might be 
possible, Allee said, although she recognized that an 
agreement would be difficult.  A compromise might involve 
Turkish Cypriot removal of the pedestrian bridge accompanied 
by a Greek Cypriot removal of a wall displaying anti-Turkish 
propaganda.  Allee confirmed our understanding that the 
letters SRSG Moller carried for Papadopoulos and Talat 
indicated UN U/S Gambari would not visit Cyprus before the 
May elections.  Moller, she noted, unlike his predecessor, 
would carry the SRSG title and thus would travel regularly to 
Athens and Ankara to advance the cause of a Cyprus 
settlement. 
 
Turkish Cypriots (Still) Frustrated 
----------------------------------- 
 
¶6.  (C)  Erol Kaymak, Chair of International Relations at the 
north's Eastern Mediterranean University, described the 
current mood of the Turkish Cypriot community as angry and 
disappointed.  He echoed the assessment we have heard 
elsewhere that Turkish Cypriots felt the international 
community had failed to deliver on its "promises" to reward 
the Turkish Cypriots for the "seismic political revolution" 
which led to their 2004 vote in favor of the Annan Plan. 
Turkish Cypriots had expected more concrete steps to "ease 
their isolation."  At the same time, the Greek Cypriot 
leadership had failed to respond in kind to Turkish Cypriot 
gestures of good will -- making the pro-settlement 
"government" of Mehmet Ali Talat increasingly unwilling to 
offer further "concessions."  Greek Cypriot claims that Talat 
was merely a puppet of Ankara -- and therefore not worth 
talking to -- were untrue and simply a pretext to avoid a 
productive dialogue with him, Kaymak said.  Talat,s 
democratic legitimacy with his own people made him an 
appropriate interlocutor.  This, combined with his ability to 
get hard things done in the north (such as the new property 
restitution legislation so important to Turkey) made Talat 
"indispensable" to Erdogan and even gave him modest influence 
over Turkish policy. 
 
¶7. (C) Erkut Sahali, private secretary to "TRNC PM" Ferdi 
Soyer expressed similar pessimism about settlement prospects. 
 Absent some kind of compelling "pressure" from the U.S. and 
UK, he suggested the odds of President Papadopoulos agreeing 
to engage in productive settlement talks were very slim.  In 
separate meetings, the Vice Presidents of the Turkish Cypriot 
Chamber of Commerce Gunay Cerkez and Hasan Ince, "MP" Mustafa 
Arabacioglu from the center-right DP, and "MP" Hasan Tacoy 
from the opposition UBP echoed these themes.  Cerkez and Ince 
felt that the EU, paralyzed from the inside by a 
veto-wielding Greek Cypriot government would never be able to 
play a neutral, constructive role in the settlement process. 
Arabacioglu suggested that even a vague threat from the U.S. 
that it might recognize the "TRNC" would be enough to force 
the Greek Cypriots to the table.  According to Sahali, the 
current stalemate was unlikely to change with Papadopoulos in 
office at least until the south,s 2008 presidential 
elections. 
 
¶8. (C) Sahali predicted that "fortunately" the Turkish 
Cypriots, pro-settlement leadership would probably stay in 
power for the foreseeable future.  The current economic boom 
meant voters were unlikely to mobilize against the ruling CTP 
-- at least not in time for June municipal and parliamentary 
by-elections.  In his meeting, the UBP,s Tacoy tacitly 
agreed, noting that his party's current leadership vacuum 
spelled electoral trouble for the nationalist opposition. 
Nonetheless, Sahali suggested that the current go-go economy 
was "unsustainable," since it was based largely on a property 
and construction bubble.  This, if coupled with continued 
stalemate on the settlement track, could spell trouble for 
the north's pro-solution leadership over the long term. 
 
 
Medium-Term Steps: Easing the Economic Isolation 
--------------------------------------------- --- 
 
¶9. (C) As a result, Sahali, said Turkish Cypriot "government" 
and businesses were trying to develop a more sustainable 
economic base.  Easing the economic isolation of the Turkish 
Cypriots was good for the community and would have the 
additional benefit of forestalling a backlash that could 
return rejectionist, nationalist leaders to power.  One key 
element in the north's economic strategy, Sahali said, was to 
encourage foreign investment to expand the vital tourism 
sector.  The goal was to attract more visitors from 
traditional source countries like the UK and Germany, while 
diversifying into the previously untapped "upscale and 
professional" tourist market.  This approach had been 
successful so far, he said, with 130,000 non-Turkish visitors 
coming to the north in 2005. 
 
¶10. (C) Sahali noted obstacles to further economic 
development, however.  There was a pressing need to improve 
the north's legislative and legal infrastructure, he said, 
pointing to a recent scandal in which a foreign real estate 
developer cheated his clients and skipped the country -- 
damaging the north's image as a safe place to invest.  Cerkez 
and Ince underlined further difficulties that hampered the 
development of the north's trade and productive sector.  The 
EU,s direct trade measure had been shelved, transportation 
links (especially air links) were complicated by the outside 
world's "embargoes" on the north, and the Greek Cypriots had 
not overcome the "political and psychological barriers" to 
trading with the Turkish Cypriots. 
 
Property and CBMs 
----------------- 
 
¶11. (C) In addition to seeking economic ways to lessen their 
isolation, the Turkish Cypriots were making other gestures of 
"good will" to smooth the way for reunification, according to 
Turkish Cypriot Mayor of Nicosia Kutlay Erk, and his ally in 
the ruling party, CTP SYG Omer Kalyoncu.  Recent moves to 
open a crossing point at Ledra Street were a case in point, 
Erk maintained, despite "overblown" Greek Cypriot reactions 
to the "pedestrian overpass" he had constructed there.  Erk 
insisted that the bridge was intended to ease the opening of 
 
the checkpoint by meeting the military's needs to resupply 
troops in the area -- and that the Turkish Cypriots would be 
willing to meet "any time and anywhere" to discuss the 
technical details of other arrangements.  Taking the bridge 
down unilaterally at this point, however, would be too much 
of a concession, Erk suggested.  He said he could envision a 
situation where traffic went around the bridge, which could 
be left standing as an "artistic" monument to peace.  Erk 
criticized the UN, however, for "bowing to Greek Cypriot 
pressure" on the question of Ledra Street, suggesting that 
UNFICYP might no longer have the credibility to play honest 
broker in talks over the issue.  The arrival of the new 
UNFICYP Chief of Mission might change the dynamics of the 
situation, but Erk felt that a "third party" such as the U.S. 
or "an EU member state" might be a more effective mediator. 
 
¶12. (C) Meanwhile, both Erk and Kalyoncu predicted that the 
new Turkish Cypriot property legislation would pass muster 
with the ECHR -- even if some Greek Cypriots would have to 
accept compensation rather than restitution of their property 
in the north.  Indeed, although the new Property Commission 
had not been formed, some Greek Cypriots had already made 
informal inquiries about compensation or restitution.  Erk 
and Kalyoncu expect more applications if the ECHR rules that 
the new Commission indeed constitutes an effective local 
remedy.  The echoed the common local assumption that Turkey, 
which had strongly supported passage of the north's new 
property regime, would gladly foot the bill for the 
Commission's decisions on compensation and restitution in 
order to stave off even costlier Loizidou-type ECHR rulings 
in the future. 
 
TIP Issues:  Not a Priority on Either Side of the Green Line 
--------------------------------------------- --------------- 
 
¶13.  (C) Neither our Greek Cypriot nor Turkish Cypriot 
interlocutors had much new information to offer regarding TIP 
issues.  Eliza Savvidou from the ROC Ombudsman's Office 
expressed considerable frustration with the government's 
delay in implementing the TIP comprehensive National Action 
Plan that the Council of Ministers adopted last spring.  On 
the Turkish side, Sahali reiterated that the weaknesses in 
the north's infrastructure kept them from effectively 
preventing and containing the problem, but maintained that no 
new cabaret licenses had been issued under the Talat 
administration.  He also pointed to the creation of a new 
victim helpline in the north as a step in the right direction. 
SCHLICHER