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DE RUEHNC #0766/01 1430753
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C O N F I D E N T I A L NICOSIA 000766 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 05/23/2016 
TAGS: PROG
SUBJECT: EUR/SE DEPUTY DIRECTOR BAXTER HUNT'S MAY 8-9 
CYPRUS VISIT 
 
REF: A. A. NICOSIA 352 
 
     ¶B. B. NICOSIA 113 
     ¶C. C. NICOISA 476 
 
Classified By: Ambassador Ronald L. Schlicher for reasons 1(b) and (d) 
 
¶1.  (C)  Summary. EUR/SE Deputy Director Baxter Hunt visited 
Nicosia May 7-9 and held meetings with key Cypriot political 
and business figures in both the north and the south.  On the 
Greek Cypriot side, AKEL Spokesman and Foreign Relations 
Secretary Andros Kyprianou and DISY Deputy Leader Averof 
 
SIPDIS 
Neophytou predicted strong showings for their respective 
parties in the May 21 parliamentary elections.  Both outlined 
specific shortcomings of the Annan Plan and made clear that 
even referring to the Plan in public was politically 
dangerous given the "demonization of the term by the 
Papadopoulos administration." With his Greek Cypriot 
interlocutors, Hunt stressed the need to strengthen the 
economy of the north in order to help the Turkish Cypriot 
community distance itself economically and politically from 
Ankara. Kyprianou and MFA Cyprus Question and EU Affairs 
Director Ambassador Erato Marcoullis agreed, but rejected any 
effort in this direction that amounted to "advancing the 
economy of a state." 
 
¶2.  (C)  In the north, "President" Talat's Undersecretary 
Rasit Pertev stressed Turkish Cypriot disappointment at the 
lack of progress towards a solution as well as growing 
reservations about the UN's role.  Erkut Sahali, Private 
Secretary to the "TRNC Prime Minister" predicted that 
 
SIPDIS 
municipal and parliamentary bi-elections in June would not 
undermine the ruling CTP's pro-settlement policies or its 
grip on power. Representatives of the Turkish Cypriot Chamber 
of Industry expressed frustration with trade restrictions on 
the north's economy and called on the United States to take 
the lead in easing Turkish Cypriot economic isolation.  End 
Summary. 
 
 
ROC Elections and Beyond 
 
¶3.  (C) AKEL spokesman Andros Kyprianou began by outlining 
the party's expectations for the May 21 parliamentary 
elections.  AKEL considered winning at least 30 percent of 
the vote "to be of vital importance."  DISY and DIKO, of 
course, would use "all means necessary" to improve their 
positions.  This was particularly true for DISY, who want to 
increase their numbers to form a government coalition to 
exert pressure on the President and alienate AKEL. Even so, 
Kyprianou expected AKEL to maintain its position and again 
win the largest percentage of the vote.  Kyprianou noted that 
even in a campaign focused largely on domestic issues, the 
parties would seek to use their handling of the Cyprus issue 
to build support.  AKEL, for example, was basing its campaign 
largely on its advocacy for a Cyprus settlement.  The party 
firmly backed the technical talks agreed to in Paris by 
President Papadopoulos and UNSYG Annan, but believed the 
parties should discuss issues of political significance as 
well as matters of daily life.  Kyprianou noted that after 
the elections, AKEL planned to focus on preparing the ground 
for the beginning of negotiations by 1) continuing its 
dialogue with the north's ruling CTP party and 2) increasing 
its sponsorship of and participation in bicommunal events. 
Improving strained relations with CTP was particularly 
important. 
 
¶4.  (C)  DISY deputy leader Averof Neophytou was more careful 
in speculating on the election outcome. DISY was prepared to 
take an electoral hit if it meant advancing the prospects for 
reunification.  AKEL, in contrast, was prepared to set back 
efforts to negotiate a settlement in pursuit of votes. 
Neophytou noted his party's  disappointment at the way in 
which President Papadopoulos "used the international 
community" and "misleadingly represented the February Paris 
talks as an initiative towards the island's unification, when 
in actuality the talks did not serve the ROC's interests." 
Neophytou also expressed his party's hopes that new efforts 
towards a settlement would begin after the election.  The 
future of the settlement was, he maintained, directly linked 
to the outcome of the May 21 vote. 
 
 
Annan Plan: In ROC, Guilt By Association 
 
¶5.  (C)  All of our Greek Cypriot interlocutors outlined 
their main objections to the Annan Plan, including: security, 
property, the number of settlers who would be allowed to 
remain, the failure of the guarantor system, the right of 
return, and the lack of clear, enforceable assurances that 
the plan would be implemented as agreed.   Still, the MFA's 
Cyprus Question Division Director Erato Marcoullis began her 
meeting with Hunt by expressing her optimism with regard to 
the future of the Cyprus issue.  Marcoullis was strongly 
 
critical, however, of the UN's handling of the last round of 
negotiations and the UNSYG's "misuse" of his arbitration 
authority.  Because of the way in which the negotiations were 
handled, the Greek Cypriot public came to see the Annan Plan 
as an imposed solution analogous to the 1960 treaties of 
guarantee that established the discredited guarantor system. 
 
¶6.  (C)  Neophytou pointed out that his party had suffered 
dearly for its "Yes" vote in the Annan Plan referendum. DISY 
supporters had been labeled "traitors" and had been accused 
of forming a coalition with the "Anglo-Americans" and Turkey. 
For this reason, he noted, his party "cannot publicly support 
the Annan Plan."  Although he is willing to acknowledge 
privately that the Plan remained the only viable basis for 
reunification, Neophytou observed that President Papadopoulos 
and his supporters had successfully demonized the Plan to the 
point where it was now political poison.  In terms of future 
settlement efforts, Neophytou recommended that:  1) the 
"Annan" name should be removed from any plan; 2) there should 
be no future "Yes/No" referenda, and 3) the Greek Cypriot 
public should be reassured that the EU was playing a central 
role, even if it was not.  He explained that Greek Cypriots 
have a tendency to show defiance to the international 
community as a symbol of patriotism, and majority "No" votes 
in such scenarios are  generally viewed as a national 
triumph.  The power and purity of "NO" or "OXI" was deeply 
ingrained in the Greek psyche, witness the national 
celebration every October 28 of Metaxas' rejection of 
Mussolini's ultimatum on "OXI" Day. 
 
Economic Development for Turkish Cypriots, But Not "TRNC" 
 
¶7.  (C) With his Greek Cypriot interlocutors, Hunt stressed 
the importance of building up the Turkish Cypriot economy 
and enabling Turkish Cypriots to distance themselves 
politically and economically from Ankara.  Kyprianou was 
quick to point out AKEL's support of the 259 million euro EU 
aid package for the Turkish Cypriot side.  AKEL would, 
however, insist that any international trade with Turkish 
Cypriot firms be conducted through "legal harbors" (in the 
south).  The Greek Cypriots also had a "sensible" proposal on 
the table that would legitimate trade through Famagusta. 
While expressing his support for Turkish Cypriot economic 
development, he also underscored AKEL's concern that if the 
north became economically self-sufficient, the Turkish 
Cypriot side would lose interest in a solution. 
 
¶8.  (C) Marcoullis articulated the GOC view that Talat and 
the Turkish Cypriots were simply not in control in the north 
and this was the most serious drag on efforts to reach 
agreement on a Cyprus settlement.  According to Marcoullis, 
it was the Turkish military that exercises effective control 
over the Cyprus issue. Expressing sympathy for the Turkish 
Cypriots' position and their "deprivation suffered as a 
function of Turkey's military occupation of one-third of 
Cyprus," Marcoullis also endorsed "the economic development 
of the Turkish Cypriot community."  She made a point to 
distinguish this, however, from programs or policies aimed at 
"boosting the economy of a separate state."  Marcoullis also 
credited the ROC with offering Turkish Cypriots a range of 
benefits since the opening of the crossing points in April 
¶2003.  Turkish Cypriots were entitled to free medical care in 
the south.  They could (and did) claim ROC passports and the 
benefits of EU citizenship.  Turkish Cypriot income had 
effectively doubled in the three years since the crossing 
points opened, largely because of Greek Cypriot generosity, 
she claimed. 
 
 
UN "Disappoints" the North 
 
¶9.  (C)  "President" Talat's Undersecretary, Rasit Pertev, 
told Hunt that there were "worrying signals" that the Greek 
Cypriot political leadership was trying to "annihilate the 
Annan Plan."  The UN had repeatedly failed to take a strong 
stance in its dealings with Greek Cypriots and had 
inexplicably backed off its previous (and in his view, 
correct) insistence that the Annan Plan be used as the basis 
for further settlement talks.  Pertev agreed with Hunt that 
the Plan had been effectively "demonized" on the Greek 
Cypriot side.  Hunt suggested that the Turkish Cypriot side 
be flexible in its terminology and not lock itself in to the 
name "Annan."  It was important, Hunt added, for the Turkish 
Cypriots to retain the moral high ground and keep from doing 
harm to the pro-solution image they had earned in the 
international community.  Pertev said the Turkish Cypriots 
could be flexible with regard to use of the term "Annan 
Plan," but expressed worry over President Papadopoulos' 
apparent rejection of a bicommunal, bizonal solution in a May 
9 interview the French publication "L'Express."  This cast 
doubt over Greek Cypriot commitment to the long-standing and 
universally accepted goal of a shared federation, and was 
"extremely troubling for the Turkish Cypriots," who were 
 
still trying to overcome the negative fallout from the 
February 28 Paris meeting between Annan and Papadopoulos. 
 
¶10.  (C)  Pertev maintained that the Turkish Cypriot side was 
disadvantaged in its dealings with the Greek Cypriots 
because UN SRSG Michael Moeller was not an impartial 
mediator.  Moeller spent more time on the Greek side, used 
Greek Cypriot sources for information, was fluent in the 
Greek language, and had internalized the Greek Cypriot point 
of view with regard to the Cyprus issue.  Because of the 
general Turkish Cypriot perception that "UN sympathies lie 
with the Greek Cypriots," Pertev asserted that the Turkish 
Cypriot leadership needed to increase its efforts to 
familiarize Moeller with their positions, perspectives, and 
sensitivities.  The Turkish Cypriots would try to set up 
meetings in the weeks ahead between Moeller and 
representatives of the north's civil society, business 
community, and political parties.  Pertev hoped this would 
result in more evenhanded dealings on the part of the UN. 
Pertev feared that UNSYG Annan, with only six months left in 
office, was unwilling to address any issue that would fail to 
result in a "guaranteed victory" for his Good Offices 
Mission.  This, he asserted, was why U/SYG Gambari had been 
so reluctant to visit the island. 
 
 
Little Change Expected After "TRNC" June Elections 
 
¶11.  (C) Erkut Sahali, Private Secretary to "TRNC PM" Soyer, 
predicted that June 25 municipal and parliamentary 
by-elections would not shake the pro-settlement CTP's grip on 
power in the north.  Because the opposition was so 
disorganized and demoralized, the CTP would probably even 
consolidate its dominant political position by winning both 
vacant "parliamentary" seats and increasing the number of 
municipalities it controlled.  He suggested that after the 
elections, the CTP would probably seize the initiative and 
reorganize several "state" agencies.  For example, the 
electricity authority "KIBTEK," currently located in the 
"Ministry of Agriculture" (and therefore controlled by the 
TP's nationalist junior partner, the DP of Serdar Denktash) 
would move to the CTP-run "Ministry of Finance."  Sahali said 
these changes were designed to streamline the functioning of 
the "state," however, and not to boost CTP's patronage power. 
 He pointed out that other planned shifts would either be 
zero-sum swaps (with Serdar retaining control of the "Office 
of the Environment" as it moved from the DP-run "Ministry of 
the Economy" to "Agriculture") or losses for the CTP (with 
the public citrus company "CIPRUVEX" moving from "Finance" to 
"Agriculture").  He was less  clear whether any 
"cabinet"-level reshuffles were in the works, but stressed 
that none of the anticipated changes would derail the Turkish 
Cypriots' broad pro-settlement policy orientation. 
 
 
Economic Optimism, but Global Isolation 
 
¶12.  (C) Outgoing President of the Turkish Cypriot Chamber of 
Industry Salih Tunar (who had resigned from his position the 
day before his meeting with Hunt to run as a DP candidate in 
the June parliamentary Elections) joined incoming chamber 
president Musa Sonmezler and chamber secretary Galip Yuksel 
in stressing the paramount importance of economic development 
in the Turkish Cypriot community.  Sonmezler outlined the 
expansion of the "TRNC" economy during the last two years, 
citing tourism, construction, and the influx of students as 
the key growth factors.  He added that the "TRNC" was 
enjoying low inflation coupled with low interest rates, but 
stressed that international economic isolation remained the 
significant barrier to real, sustainable economic growth. 
Absent this isolation, Sonmezler was confident the Turkish 
Cypriots could "catch up with" their Greek Cypriot neighbors 
in a few short years.  According to Sonmezler, however, Greek 
Cypriots continued to insist on unjustly isolating the 
Turkish Cypriots.  Even as they insisted all the north's 
trade pass through the ROC-controlled south, he added, the 
Greek Cypriots had not overcome their political and 
psychological barriers to trading with Turkish Cypriots. 
These continued to be the most significant obstacles to 
north-south trade. 
 
¶13.  (C)  All of Hunt's Turkish Cypriot interlocutors 
expressed satisfaction with the Austrian Ambassador's May 8 
"Europe Day" speech in the north in which she said that the 
EU would seek to restore the 120 million euros of aid that 
had been lost when the parties had failed to reach agreement 
on the modalities of implementation before a key deadline 
(ref c).  Even so, Sonmezler and Yuksel said that they 
anticipated the Greek Cypriots would "create difficulties" by 
imposing serious restrictions on Turkish Cypriot access to -- 
and use of -- EU aid.  Hunt's interlocutors were unanimous in 
predicting that Turkey's implementation of the Ankara 
Protocol (the opening of Turkish ports and airports of 
Cyprus-flagged vessels) would be a "disaster" for the Turkish 
Cypriot economy.  Turkey was currently the north's only 
conduit for external trade. According to Sonmezler, if that 
door were opened to Greek Cypriots, "it would be  closed to 
Turkish Cypriots."  As an example, he described how the Greek 
Cypriots have been able to block McDonalds from opening 
franchises in the north by threatening to withdraw concession 
licenses in the south.  Sonmezler urged the United States to 
set an example to the international community by supporting 
the north's economic development and taking "more concrete 
steps to ease Turkish Cypriot isolation."  Yuksel outlined 
plans by foreign investors to expand and diversify the 
tourism sector through the construction of nine new hotels in 
the Karpass region, increasing the "TRNC's" current hotel bed 
capacity to approximately 30,000 by the end of 2007. 
SCHLICHER