VZCZCXRO4441
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHNC #0522/01 0961317
ZNY CCCCC ZZH
P 061317Z APR 06
FM AMEMBASSY NICOSIA
TO RUEHC/SECSTATE WASHDC PRIORITY 5824
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNDT/USMISSION USUN NEW YORK 0515

C O N F I D E N T I A L SECTION 01 OF 03 NICOSIA 000522 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 04/06/2016 
TAGS: PGOV PREL EAID EUN TU CY
SUBJECT: SMOOTHING TURKEY'S EU PATH -- DG ENLARGEMENT 
DISCUSSES AID TO TURKISH CYPRIOTS 
 
REF: A. NICOSIA 476 
     ¶B. NICOSIA 273 
 
Classified By: Ambassador Ronald Schlicher, reasons 1.4 (b) and (d). 
 
¶1. (C) SUMMARY.  On April 6, visiting EC Director General for 
Enlargement Michael Leigh (accompanied by Georg Ziegler and 
Andrea Battista from the Commission's Cyprus team) briefed 
Ambassador Schlicher on implementation plans for the European 
Union's assistance package to the Turkish Cypriot community 
(ref A).  He also gave a readout of his April 5 meeting with 
"TRNC President" Mehmet Ali Talat, in which the Turkish 
Cypriots expressed a general willingness to work with the EU 
on aid implementation -- and a definite preference for 
high-profile infrastructure projects.  Leigh anticipated 
difficulties as the Commission tried to balance Greek Cypriot 
and Turkish Cypriot sensitivities over symbolic issues like 
where to place the European aid office, as well as practical 
questions about how projects would be approved.  He expressed 
a willingness to find face-saving compromises where possible, 
and endure criticism from both sides when necessary.  Leigh 
predicted rough sailing in Turkey's EU accession process 
during the year ahead -- especially if Cyprus-related issues 
like Turkish implementation of the Ankara Protocol could not 
be resolved or at least "put on the back burner."  END 
SUMMARY. 
 
TURKISH EU ACCESSION: BUY TIME, COOL PASSIONS 
--------------------------------------------- 
 
¶2. (C) In his April 6 meeting with Ambassador Schlicher, DG 
for Enlargement Michael Leigh characterized the EU's aid 
package for the Turkish Cypriots as part of a broader 
strategy to smooth Turkey's EU accession process.  Leigh 
predicted 2006 would be a rocky year for Turkish-EU 
relations.  The main challenge would be to stave off a crisis 
over Turkish implementation of the Ankara Protocol and the 
opening of Turkish ports to Cypriot vessels and planes. 
Absent progress on this front, the Commission could be forced 
to give Turkey negative marks in its autumn "Progress 
Report," perhaps prompting the ROC, Austria, France, or 
others to press for the suspension of Turkish membership 
talks until Ankara fulfilled its obligations to the EU. 
Freezing the EU accession process could be politically lethal 
to Erdogan, Leigh added.  Should AKP lose out to more 
Euro-skeptical forces in upcoming elections, it could be a 
major strategic setback for Turkey and for Europe. 
 
¶3. (C) Leigh stressed that Brussels was looking for a 
diplomatic way out of this "worst case scenario."  He 
suggested that other member states (especially Greece), as 
well as outside "friends" (especially the U.S.) could play a 
key role in convincing Cyprus and other Turco-skeptics that 
derailing Turkey's membership talks was in nobody's interest. 
 Leigh felt that Papadopoulos would not slam on the brakes if 
he stood alone; it was up to the other member states to call 
his bluff.  The Europeans needed to find ways to get the 
Cyprus issue "onto the back burner" so "passions could cool." 
 
¶4. (C) To this end, the EU would support UN efforts to 
restart settlement talks -- or at least technical 
negotiations.  Leigh said he would discuss with the UN the 
possibility of some kind of international or UN 
administration of the Famagusta port.  With luck, a 
UN-brokered deal on the operation of the port could unblock 
both the EU's direct trade measure and Turkish implementation 
of the Ankara Protocol.  Meanwhile, the Commission hoped that 
an active and visible EU assistance program for the Turkish 
Cypriots could provide "some of the cover" Erdogan needed to 
show flexibility on ports and help avert a crisis. 
 
AID PRIORITIES AND AMOUNTS 
-------------------------- 
 
¶5. (C) Leigh outlined the Commission's general priorities for 
its 139-million euro aid package, stressing that EU aid would 
be more focused on infrastructure -- as opposed to the U.S. 
CyPEG program, which focuses on economic development and 
technical assistance.  He noted that the bulk of EU money 
would be spent on "public works" projects including power 
generation, waste/wastewater management, and environmental 
protection.  He added that the EU would also set aside 2.5 
million euros ("to start with") for a scholarship program for 
Turkish Cypriots (since the ROC had been making it 
"difficult" for Turkish Cypriots to study at European 
universities under existing EU programs).  Additional 
priorities included small business development, demining, 
civil society, and other "reconciliation" efforts.  Leigh 
expressed optimism that the 120 million euros lost during the 
deadlock over aid at the end of the last budget year (ref B) 
could be "recuperated from other sources," bringing the total 
 
NICOSIA 00000522  002 OF 003 
 
 
amount of EU aid back up to the originally planned level of 
259 million.  Leigh agreed that EU implementers should work 
closely with USAID implementers to avoid duplication, share 
experience, and jointly encourage the Turkish Cypriots to 
prioritize their development goals more efficiently. 
 
"ON THE WHOLE," TALAT PLAYS ALONG 
--------------------------------- 
 
¶6. (C) Commenting on his meeting with Talat, Leigh noted that 
the Turkish Cypriots "appeared to be of two minds" regarding 
EU aid.  On one hand, they were wary of the political 
implications of accepting it (often pooh-poohing European aid 
as insignificant compared to what they received from Turkey). 
 They were also concerned about Greek Cypriot influence over 
the aid, and the possibility that the Papadopoulos 
administration could use its position as a member state to 
block or interfere with specific projects.  Finally, 
according to Leigh, the Turkish Cypriots were concerned that 
the Commission's plans to invest in demining and other 
reconciliation measures would divert resources away from 
purely Turkish Cypriot priorities into bicommunal projects. 
 
¶7. (C) At the same time, however, Leigh indicated the Turkish 
Cypriots were "really interested" in European assistance, 
especially in key infrastructure areas like power generation. 
 The Commission, Leigh insisted, was a more "consultative" 
donor than Turkey (which gave aid by "fiat"), thereby 
allowing the Turkish Cypriots a greater say in priorities for 
EU assistance.  As a result, Leigh noted, Talat appeared "on 
the whole" willing to work with the EU on allowing aid to 
move forward -- apparently against the initial advice of 
Ankara and nationalists here on the island who had insisted 
Talat turn it down.  Talat's current preference, Leigh 
suggested, was for EU aid to arrive quickly and with high 
visibility, perhaps even in advance of Turkish Cypriot 
by-elections in June, where Talat's party would be judged on 
whether or not it had delivered on promises to end the 
community's isolation. 
 
BALANCING SENSITIVITIES 
----------------------- 
 
¶8. (C) Leigh had not yet met with ROC Presidential Diplomatic 
Advisor Tasos Tzionis at the time he called on us, but 
nonetheless predicted the Commission would face several Greek 
Cypriot political objections as its assistance program moved 
forward.  The most immediate (and politically charged) 
question for the Europeans to tackle was, according to Leigh, 
how the EC would manage its presence in the north.  The 
Turkish Cypriots insisted that the Commission run its program 
out of an office in the north to avoid the impression that 
the GOC had control over the aid.  As a practical matter, 
Leigh acknowledged, the EC would have to open some kind of 
office there to support its projected staff of 20-25 
implementers.  On this question, he said, the Commission was 
ready to "handle the blasts" it would get from the GOC, for 
whom an official "office" in the north was a political red 
line.  Nonetheless, Leigh was interested in finding a 
face-saving compromise -- and was visibly intrigued by 
USAID's solution whereby CyPEG contractors had "corporate 
offices" in the south, but worked mostly out of "service 
centers" in the north. 
 
¶9. (C) Leigh added that the role of the ROC in approving and 
implementing specific aid projects was also a potential point 
of contention.  The Turkish Cypriots had expressed worry that 
the ROC could cause problems in the Phare Committee, which 
approves aid project proposals.  At the same time, Talat had 
been concerned that the Commission's official representative 
to the ROC (a Greek Cypriot who is a close ally of President 
Papadopoulos) might exercise undue influence over project 
implementation.  Leigh said he had replied by stressing that 
the DG Enlargement team, not the local Commission 
representative, would control the assistance package -- and 
that there was an "impenetrable Chinese wall" between the 
two.  He added that decisions on the Phare Committee were 
("in theory, at least") taken by qualified majority, so the 
ROC should not be able to block specific projects 
unilaterally. 
 
¶10. (C) At the same time, Leigh acknowledged the ROC's 
concerns as the legal and sovereign government on Cyprus -- 
and said that the Commission had agreed on a parallel 
"consultation" mechanism to satisfy Greek Cypriot 
sensitivities.  According to Leigh, ROC officials would be 
given an opportunity to discuss project plans directly with 
the Commission during the two-month study period before 
specific proposals are decided on by the Phare Committee. 
Leigh predicted the Greek Cypriots would probably "exaggerate 
the importance" of this consultation process, perhaps 
 
NICOSIA 00000522  003 OF 003 
 
 
mistakenly conflating it with a veto over Commission aid 
decisions.  He noted that the MFA had apparently already set 
up some kind of EU aid "task force," for which he saw no need. 
 
¶11. (C) Nevertheless, the Commission would not allow the ROC 
to veto decisions, he insisted, although his team would be 
sensitive to legitimate concerns -- such as respect for Greek 
Cypriot property in the north.  For the bulk of their 
infrastructure projects, however, Leigh predicted the 
property issue could be "managed," since public works 
investment generally did not take place on private land.  He 
hoped that the ROC would allow improvement/restoration of 
public infrastructure on public land that been controlled by 
he ROC prior to 1974, since such investments would defray the 
costs of reunification and benefit the government of a united 
Cyprus in the long run.  (COMMENT: This may be overly 
optimistic.  The GOC is very sensitive about any property 
development in the north.  Although the Greek Cypriots did 
not balk at a smaller EU initiative to renovate public 
downtown areas in three northern cities in 2004, the 
political atmosphere on the island has changed significantly 
since then. END COMMENT.) 
 
COMMENT 
------- 
 
¶12. (C) Even if he has underestimated some of the 
difficulties the EU's aid program will face, Leigh's apparent 
willingness to resist political pressure is refreshing to see 
in a Commission official.  If this is reflected by his staff 
in the coming project implementation phase, European aid may 
actually have a meaningful impact.  His commitment to closer 
cooperation with CyPEG was equally refreshing, given the 
local Commission team's traditional resistance to sharing 
information with American interlopers in an EU member state 
(reftels).  We will continue to press for closer coordination 
so that our aid programs complement each other.  END COMMENT. 
SCHLICHER