US embassy cable - 04BRUSSELS3821

C O N F I D E N T I A L SECTION 01 OF 03 BRUSSELS 003821 
 
SIPDIS 
 
E.O. 12958: DECL: 09/09/2014 
TAGS: PREL, EAID, ETRD, ZS, TU, EUN, USEU BRUSSELS 
SUBJECT: EU AID/TRADE FOR NORTH CYPRUS STALLS 
 
REF: A. USEU BRUSSELS 3778 
 
     B. USEU BRUSSELS 3225 
 
Classified By: USEU/POL Harry O'Hara, reasons 1.4 b/d. 
 
 1.  (C) Summary: EUR DAS Kennedy's Brussels consultations 
coincided with an important September 2 COREPER meeting in 
which EU member states were unable to find a way to move the 
Commission's proposed trade preferences for Northern Cyprus 
ahead -- leaving the EC's trade/aid package effectively 
frozen for now. The Dutch Presidency might have to delink 
trade and assistance in order to get the assistance through. 
The Commission and the Turkish Mission to the EU are 
concerned that delinking the packages might have a negative 
impact on those in the North who voted for reunification. On 
the other hand, there is broad understanding that a nasty 
public spat among EU member states over North Cyprus could 
spill over, and adversely impact this fall's intense debate 
on whether to offer EU accession talks to Turkey.  End 
Summary. 
 
2.  (C) On September 2, EUR DAS Kennedy met key European 
Commission officials involved in the formulation of the EC's 
trade and assistance package for North Cyprus and in the 
preparation of the EC's October 6 Report for Turkey. (Turkey 
discussions ref A.) Kennedy also met with Turkish Mission to 
the EU officials, Council Secretariat officials including 
Director General Robert Cooper and, via a telephone 
conference, with Dutch MFA European Affairs Official Pieter 
de Gooijer. During her visit, the EU Perm-Rep Ambassadors 
also discussed the Commission's proposed trade and aid 
proposals for North Cyprus at their September 2 COREPER (EU 
decision making body made up of the EU member state Perm-Reps 
assigned to the EU) meeting.  Both Commission and the Council 
Secretariat officials expressed concern over Cypriot 
 
SIPDIS 
resistance to EU trade preferences to North Cyprus. 
 
Trade preferences in trouble 
---------------------------- 
 
3.  (C) Pierre Mirel (please protect throughout), 
DG-Enlargement head of unit for the Cyprus Task Force, 
expressed worry to Ambassador Kennedy that the EU member 
states will not/not extend EU trade preferences to North 
Cyprus. He was concerned that this blockage will undercut 
pro-unification forces in North Cyprus, particularly Talat. 
Though he had no evidence that Denktash is interested in 
running again in next elections in North Cyprus, he felt that 
direct trade with the EU was absolutely critical to show 
those who supported the Annan plan that they would get 
"something" from the EU for their efforts. He noted that the 
EU's 259 million Euro aid package to North Cyprus (over three 
years) will take much longer to show "visibility" than trade. 
 Mirel wondered if this "visibility" of trade, when compared 
to the slower disbursement of an aid package, is why the 
Greek Cypriots are so vigorous in their opposition to the 
trade preferences.  Nonetheless, he also expressed concern 
that the Greek Cypriots might "stall" the aid package until 
they get assurances from the other member states in the 
Council that the trade part of the deal is "dead." (Mirel was 
speaking to us even before the COREPER discussion on Cyprus 
had taken place.) Kennedy urged the Commission to continue to 
pursue their proposed measures for the Turkish Cypriots, even 
if the measures were ultimately not realizable, in order to 
send a positive signal to Talat and prevent Papadoupolos from 
becoming further emboldened in the run-up to the December 
vote on Turkey,s EU accession.  She noted this would 
maintain awareness among EU member states that the Greek 
Cypriots were the obstructionists in these efforts. 
 
Dutch opposed to unbundling trade and aid 
----------------------------------------- 
 
4. (C) Dutch MFA official De Gooijer said that the Dutch 
Presidency wants to go ahead with both trade and aid. The 
Cypriots had told him, he said, that they could "live" with 
aid but hold "considerable concerns -- even objections -- to 
direct trade." In Cyprus, they had told visiting Dutch 
Minister for European Affairs Atzo Nicolai that they want to 
be "flexible" on the North -- though it remains unclear what 
they are prepared to be flexible about. 
 
"Hiding" behind dueling legal interpretations? 
--------------------------------------------- - 
 
5.  (C) Mirel told us that some member states are hiding 
behind the current disagreement between the Commission and 
the Council Legal Services over the legal basis of EU trade 
preferences for North Cyprus. (ref  B). This disagreement 
allows some member-states (he specified Italy, Germany, and 
France) to avoid weighing in on this issue. He also said that 
Cyprus has been very active in working member states to get 
support, not only for their position, but also to get their 
"solidarity." In this context, "solidarity" for Cyprus would 
mean that other member-states would join up with Cyprus so as 
to prevent a "new" member state from being isolated or 
"embarrassed" in a public and open fashion. He suggested that 
other member-states might also be sympathetic to a "small" 
state standing up for what it believes in and might decide to 
support Cyprus on this basis.  States might also link the 
Cyprus problem to their own unique concerns (i.e. Spain and 
Gibraltar) and side with Cyprus in the hopes they are spared 
from a similar situation later on.  In light of these 
potential internal EU sentiments, Mirel told us that it is 
hard to see how the Commission's interest in extending trade 
preferences to North Cyprus can move in a positive direction. 
 
Possible next steps on Cyprus; spill-over on Turkey 
--------------------------------------------- ------ 
 
6.  (C) Mirel wondered if the Dutch Presidency might decide, 
or feel compelled, to decouple the aid package and the trade 
preferences at the end of September or beginning of October. 
To avoid this, he understood that some in the Commission seem 
to believe that by letting the Cypriots "win" the argument 
over which legal service advice to follow (i.e. go with the 
Council ruling that it should be consensus, and not qualified 
majority voting, for trade preferences to North Cyprus), 
Nicosia would be inclined to accept trade preferences.  Mirel 
expressed skepticism that giving the Cypriots what they want 
in this area would move Cyprus to accept trade in any case. 
Enlargement Director General Fabrizio Barboso told DAS 
Kennedy that Turkish FM Gul had written to CFSP High-Rep 
Solana asking that the trade and aid packages not be 
delinked.  In discussions with key Solana advisor, Robert 
Cooper, he suggested a blow-up among the member-states over 
North Cyprus could endanger a positive EU judgment on 
offering accession talks. Cooper suggested that this could 
affect strong Greek support for Turkey and could also lead 
the Dutch to postpone the trade part of the North Cyprus deal 
until after Turkish accession issues are settled this fall. 
 
7.  (C) Mirel suggested that Turkey's decision to limit it 
customs union to the "EU-minus Cyprus" had been a mistake. He 
wondered, however, whether Cyprus would permit aid to go 
ahead even with an accommodation by Turkey on this. 
Currently, Cyprus has been working to modify the Commission's 
aid proposal and to introduce new concerns about it. The 
Cypriots are now asking the Commission to exclude any 
assistance to public administrators in North Cyprus, to 
provide guarantees that no Commission money will go to 
"contested properties," and that the EC not "sign" any 
documents that would provide any kind of implicit recognition 
of North Cyprus or its officials. Turkish diplomatic 
officials here told Kennedy that Ankara would be ready to 
find a way to extend their current Customs Union with the EU 
to all 25 members, but feel that they need to get something 
in return. Kennedy urged that Turkey not delay on this issue. 
 
The Greek/Turkey Factor 
----------------------- 
 
8.  (C) Mirel said that one factor working against asking the 
Greeks to lean on the Cypriots to solve the current impasse 
is the wider Turkish game. Greece needs Cyprus to agree to 
offer Turkey a date for EU talks, and does not want to do 
anything to get in the way of this critical Greek political 
objective. De Gooijer also told us that during his visit, 
Dutch Minister Nicolai told the Cypriots that the EU expects 
the Greek Cypriots to keep their concerns about North Cyprus 
"bilateral" and not carry them out "at the expense of EU-25 
decisions on Turkey."  De Gooijer also said that the Dutch 
Prime Minister had urged Greek PM Karamanlis not to let 
Greek/Turkey bilateral issues become problems in the EU's 
relationship with Turkey.  The Dutch have also been telling 
the Turks to avoid controversial actions, including at the 
forthcoming Organization of Islamic Conferences (OIC) 
meeting, where the Northern Cypriots will allegedly be 
described as the Turkish Cypriot state.  In a separate 
conversation with Turkish Mission to the EU Ambassador 
Demiralp, Demiralp denied that this was the case and 
emphasized that the Northern Cypriots were part of the 
organization under the name of the Turkish Cypriot 
constituent state, a name drawn from the Annan plan. 
 
EU Cyprus Package Stalls; "political" decision next? 
--------------------------------------------- ------- 
 
9.  (C) In the end, Cyprus did hold tough at the COREPER 
meeting, and no EU member state was willing to push them to 
back off.  EU-Enlargement Director-General Barboso and his 
staff members told Kennedy that the Commission legal service 
was asked to write another paper analyzing the Council's 
legal opinion. Some member-states had proposed a contact 
group meeting and others suggested a trip to Cyprus. In light 
of Dutch Minister Nicolai's recent visit, neither idea went 
anywhere at COREPER. Another idea that was floated at 
COREPER, per Barboso, was taking this to the EU Foreign 
Ministers at the September 13-14 General Affairs and External 
Relations Council (GAERC) on the grounds that it is becoming 
a political decision. Barboso noted that this could really 
open the discussion on North Cyprus in an unpredictable 
fashion with a different set of interlocutors.  But, he said, 
for him the most important thing to come out of COREPER is an 
understanding that the EU differences are "political," not 
"legal." 
 
10. (C) Cooper agreed that the North Cyprus problem is no 
longer legal but is political.  Cyprus continues to oppose 
direct trade links, and remains "quiet" on the EU's 259 
million Euro assistance package to North Cyprus. Cooper said 
that the EU lacks a strategy for reunification of Cyprus; 
rather what the EU has is trade/aid package that is a 
"reward" to North Cyprus for its recent vote for 
reunification. Ambassador Kennedy noted the importance 
maintaining the linkage in the trade/aid package, and advised 
against dropping either or both parts of the package, noting 
this strategy helps keep hardliners from reemerging in North 
Cyprus. Cooper replied that the EU has made a commitment to 
North Cyprus that will not be dropped. However, timing is 
also important and the EU doesn't want a political battle 
over North Cyprus, if this could hurt Turkish membership in 
the EU. 
 
Gloom? 
------ 
 
11. (C) Our gloomy Commission interlocutors characterized 
COREPER as "frozen" and the GAERC route as a "dangerous 
option." Barboso concluded that COREPER opened up a "new 
wrinkle of uncertainty" on Cyprus. 
 
12. (U) EUR DAS Kennedy cleared this message. 
 
Schnabel