US embassy cable - 04BRUSSELS1787

C O N F I D E N T I A L SECTION 01 OF 02 BRUSSELS 001787 
 
SIPDIS 
 
EUR FOR RIES & WESTON 
 
E.O. 12958: DECL: 04/23/2014 
TAGS: PREL, CY, TU, EUN, UN, USEU BRUSSELS 
SUBJECT: EU HAND-WRINGING ON CYPRUS REFERENDUM: NO CARROTS, 
FLIMSY STICKS 
 
Classified By: USEU External Affairs Officer Andrew Erickson 
for reasons 1.5 (b) and (d). 
 
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SUMMARY 
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1.  (C) One day away from a Cyprus Referendum, EU officials 
are wringing their hands in Brussels about the likely fate of 
the Annan Plan -- and the likely accession of a divided 
Cyprus into the EU on May 1.  The Head of the Commission's 
Cyprus unit told us April 23 that he is anticipating numerous 
headaches due to Turkish non-recognition the Republic of 
Cyprus -- a full EU member -- as of May 1.  Pressed by us on 
the possibility of EU actions to punish Cypriot 
intransigence, our interlocutor noted that Article 7 of the 
EU Treaty could be used, although he pointed out that this 
stick is untried, and thus should be considered a flimsy one. 
 In a related action, EU Parliament Pat Cox has initiated a 
separate Article 7 proceeding on the run up to the 
referendum, although EU Parliament action is more symbolic 
than determinant, barring further Council action. 
 
2.  (C) Comment: Despite the hand-wringing, the EU no longer 
has any carrots to encourage a positive vote in southern 
Cyprus, and its only stick, the unprecedented imposition of 
Article 7 of the Treaty of European Union, would be very 
difficult to wield, requiring as it does a consensus 
(excluding Cyprus) to proceed and a qualified majority to 
punish.  Article 7 could in an extreme application lead to 
the denial of its European Council vote to Cyprus.  But 
Turkey's situation as of May 1 is far worse.  Its accession 
quest is now crippled by its non-recognition of an EU member 
and on-going occupation of sovereign EU territory.  Combined 
with EU dissatisfaction with the Layla Zana sentence, this 
has been a bad week for Turkey in Brussels.  End comment and 
summary. 
 
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Facing Facts: There is No Plan B 
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3.  (C) One day away from a Cyprus Referendum expected to 
reject the Annan Plan in the south, EU officials are wringing 
their hands in Brussels about the likely demise of the Annan 
Plan -- and the certain accession of a divided Cyprus into 
the EU on May 1.  Commission Cyprus Unit Head Leopold Maurer 
told us April 23 that he is anticipating numerous headaches 
due to Turkish non-recognition the Republic of Cyprus -- a 
full EU member -- starting as early as two weeks from now. 
As an example, he cited a working meeting on the Turkish-EU 
customs relationship that will now need to address Turkish 
non-recognition of Cypriot goods.  Given Cyprus' full EU 
membership, it will be covered by EU agreements with Turkey 
on the same terms as any other EU state. 
 
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No Carrots 
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4.  (C) Despite good efforts by Commissioner Verheugen, EU 
Parliament President Cox, and Hirep Solana to make positive 
statements about the need for a yes vote, Cyprus politicians 
know that the EU holds no positive leverage at this point. 
EU officials have been especially miffed that their 
entreaties were kept off the airwaves by Greek Cypriot media. 
 Even so, as the treaty of enlargement has been ratified, and 
accession is a done deal, there is nothing more the EU 
bureaucracy can offer by way of blandishments to southern 
Cyprus voters.  The April 15 Pre-Donors' Conference, with its 
generous promise of post-settlement assistance, was the EU's 
last carrot, and it apparently failed to find a taker in the 
south. 
 
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And the Stick Looks Weak... 
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5.  (C) Pressed on the possibility of EU sanctions for 
Cypriot intransigence and manipulation of the vote, Maurer 
noted that Article 7 of the EU Treaty could theoretically be 
used, although he noted that this stick has never been used 
under any circumstances.  As a politically theoretical 
instrument with many bars to use, it should be considered a 
flimsy one to wield in an attempt to get Cyprus voters to 
change their votes. 
 
6.  (C) Maurer explained that under Article 7 of the Nice 
Treaty, member states could unanimously (with the exception 
of Cyprus itself) and with the two-thirds assent of the 
European Parliament, determine that rejection of the Annan 
Plan, or the circumstances of that rejection, were "a serious 
and persistent breach" of one or more of the Article 6 
provisions calling for respect of the "principles of liberty, 
democracy, respect for human rights and fundamental freedoms, 
and the rule of law...".  The Council would then vote by 
qualified majority rules on what sanctions to impose. 
 
7.  (C) We noted to Maurer that any member state could block 
the invocation of Article 7 under the terms outlined by the 
treaty, and some member states, (Greece, for example) would 
probably be inclined to do so.  Maurer agreed, but reiterated 
that this was the only legal avenue available to the EU to 
attempt to redress any manipulation of the Cyprus poll, 
presuming that the UN Secretary General decided that the 
polling had not been free or fair.  (Comment: although Maurer 
didn't mention them, the only other punishments we could 
imagine might be ones entailing blocking Cyprus from getting 
anticipated benefits, rather than trying to withdraw existing 
ones.  In theory, the EU could send a clear message to Cyprus 
that so long as the Green Line persists, Cyprus could never 
expect to get full Schengen treatment; another might be to 
block Cyprus admission into the Eurozone.  End comment.) 
 
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EU Parliament Begins 
Article 7 Proceeding 
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8.  (C) On April 23, EU Parliament President Cox's diplomatic 
adviser Joe Dunne (strictly protect) told us that President 
Cox received a letter from DISY leader Nico Anastassiades 
complaining about the management of the referendum in Cyprus. 
 Following consultations with party leaders, Cox referred 
Anastassiades' complaint to Parliament for consideration as 
an Article 7 proceeding.  Dunne said that there was no 
objection from party leaders to proceeding along this route, 
and he assessed that there was a reasonable prospect of 
getting a two-thirds majority in Parliament, probably on the 
last and only remaining scheduled vote of this session, on 
May 5.  We asked Dunne about the difficulty of getting a 
consensus in the European Council (including Greece but 
excluding Cyprus) on Article 7.  He replied that his focus is 
getting a two-thirds majority in Parliament, and said that he 
is optimistic about this prospect.  The Council issues are 
not his purview, and he would not be drawn into speculation 
on the ultimate outcome of an Article 7 effort in the 
Council. 
 
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Comment: Much Hand Wringing 
- Good Parliamentary Action 
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9.  (C) With the Accession Treaty signed, sealed, and 
delivered, the Commission no longer holds either carrots or 
sticks to push a Cyprus deal.  Given this reality, working 
level Commission priorities have shifted focus from finding a 
Cyprus settlement to making Cyprus's EU accession work on an 
island divided into mutually hostile camps.  The immediate 
impact of Cyprus accession will be to put Turkey in 
non-compliance with its customs treaty with the European 
Union, given that Turkey's deals with the EU now have to 
apply in Turkey's obligatory dealings with new EU member 
Cyprus.  Over the longer term, Turkey is going to have to 
cede additional ground on Cyprus issues if it is to maintain 
good relations with the EU during its run up to talks on an 
accession date.  This hurts Turkey's prospects for a 
favorable accession deal in December, and adds to the bad 
blood in a relationship already scarred this week by EU 
dismay about the Layla Zana verdict. 
 
10.  (C) More to the positive side, EU Parliament President 
Cox has once again shown his willingness to try to go the 
extra mile for a Cyprus settlement, even as the EU's 
political options for encouraging settlement diminish.  We 
are not in a position to evaluate Cox's adviser's assessment 
that he can get a two-thirds majority in Parliament to 
sanction Cyprus on Article 7 grounds.  If he does, however, 
the quest to punish rejectionist Cyprus through Article 7 
will likely face an extremely tough environment in the 
European Council, where Greece alone can block further 
action.  Even then, all members except Cyprus would have to 
accept the premise that Cyprus' expected no vote -- or the 
process that led up to it -- indeed constitutes "a serious 
and persistent breach" of one or more of the Article 6 
"principles of liberty, democracy, respect for human rights 
and fundamental freedoms, and the rule of law...".  Schnabel