The direct trade regulation and other new developments on the Cyprus issue

Inevitably, the car­di­nal issue pre­oc­cu­py­ing Cyprus, hence being con­stant­ly dis­cussed by politi­cians, aca­d­e­mics, the busi­ness world and the gen­er­al pub­lic, is Cyprus’ “exis­ten­tial” prob­lem caused by Turkey’s 1974 inva­sion and the ongo­ing mil­i­tary occu­pa­tion of 37 per­cent of the Republic’s territory.

In this par­tic­u­lar report­ing peri­od, a seri­ous devel­op­ment regard­ing the Cyprus prob­lem was the April 2010 change of lead­er­ship in the Turk­ish Cypri­ot com­mu­ni­ty. Upon his elec­tion, Derviş Eroğlu described the Greek-Cypri­ot posi­tions on the Cyprus issue as “max­i­mal­ist”, express­ing, how­ev­er, his deter­mi­na­tion to con­tin­ue the nego­ti­a­tion process.11Press Reports, April 2010. Eroğlu assert­ed that the prob­lem­at­ic sta­tus of the talks – ini­ti­at­ed between Pres­i­dent Christofias and Eroğlu’s pre­de­ces­sor, Mehmet Ali Talat, in Sep­tem­ber 2008 – is not the fault of the Turk­ish Cypri­ots. The lat­ter, he claimed, have dis­played a pos­i­tive approach where­as the Greek-Cypri­ots act­ed “greed­i­ly” and joined the Euro­pean Union, there­by pre­vent­ing a set­tle­ment. On the next day, Eroğlu reit­er­at­ed his erst­while posi­tion on sep­a­rate sov­er­eign­ties and cit­i­zen­ships in Cyprus. Inter­viewed by Turk­ish dailies Sabah and Rad­i­cal, he declared that the UN para­me­ters were not carved in stone. He called on the UN to re-eval­u­ate their res­o­lu­tions on the non-recog­ni­tion of the seces­sion­ist regime of the occu­pied ter­ri­to­ry, adding that the “iso­la­tion” of the Turk­ish-Cypri­ots was a “shame to human­i­ty”. He pre­dict­ed it would be hard to achieve a set­tle­ment by year’s end. When asked if there is a “plan B”, he replied that his goal is an agree­ment ensur­ing the recog­ni­tion of the Turk­ish Cypri­ots by the inter­na­tion­al com­mu­ni­ty, allow­ing them to live in “their ter­ri­to­ry” under Turk­ish guarantees.

A few days lat­er, the UN Secretary-General’s spe­cial advi­sor on Cyprus, Alexan­der Down­er, meet­ing with Eroğlu, expressed the hope that direct talks will resume.22Press Reports, April 2010. Down­er stat­ed his oppo­si­tion to the approval of the direct trade reg­u­la­tion (see below) and the con­ven­ing of an inter­na­tion­al con­fer­ence on Cyprus. Down­er made clear the UN expec­ta­tion that the talks will con­tin­ue from where they were left off and premised on what he described as the “UN para­me­ters”. Mean­while, the new Turk­ish Cypri­ot leader demand­ed re-nego­ti­a­tion of all chapters.

Fol­low­ing Eroğlu’s state­ments, Pres­i­dent Christofias called for a nation­al coun­cil meet­ing – the pres­i­den­t’s advi­so­ry body on the Cyprus issue – where the future strat­e­gy on the Cyprus issue and Eroğlu’s elec­tion were dis­cussed.33Press Reports, April 2010. Pres­i­dent Christofias analysed the recent devel­op­ments and described Eroğlu’s elec­tion as “a neg­a­tive devel­op­ment” for the nego­ti­a­tion process. Speak­ing after­wards to the press, the lead­ers of the Move­ment for Social Democ­ra­cy (EDEK), the Demo­c­ra­t­ic Par­ty (DIKO), the Euro­pean Par­ty (EVROKO) and the Green Par­ty called for the refor­mu­la­tion of the nation­al nego­ti­at­ing strat­e­gy and reit­er­at­ed that the Pres­i­dent should with­draw the “gen­er­ous gifts” he had hand­ed to Mehmet Ali Talat. These “gifts” amount­ed to exces­sive con­ces­sions to the oth­er side, includ­ing a rotat­ing pres­i­den­cy pro­pos­al, a weighed vot­ing sys­tem, and allow­ing 50,000 (ille­gal) Turk­ish set­tlers to stay after the solu­tion. EVROKO leader Demetris Syl­louris stressed, “the Euro­pean solu­tion is the only option that could end the dead­lock and cre­ate prospects for a fair and viable settlement”.

Direct talks between Christofias and Eroğlu final­ly resumed but, accord­ing to gov­ern­ment offi­cials, no progress is per­ceived to date. Polit­i­cal ana­lysts stat­ed that Turkey and the Turk­ish Cypri­ot side agreed to resume nego­ti­a­tions, not because they gen­uine­ly want the problem’s res­o­lu­tion, but for pub­lic rela­tions and com­mu­ni­ca­tion pur­pos­es.44Inter­views con­duct­ed by Nico­le­ta Athanasi­adou, Min­istry of Agri­cul­ture, Nat­ur­al Resources and the Envi­ron­ment, Nicosia, ear­ly June 2010. They also recalled Eroğlu’s stereo­typ­i­cal state­ment that the solu­tion should be based on “two sep­a­rate states, two sep­a­rate economies and two sep­a­rate peo­ples”. This posi­tion, how­ev­er, vio­lates the long-estab­lished UN frame­work that aims at reuni­fi­ca­tion based on a bi-zon­al, bi-com­mu­nal fed­er­a­tion with (a sui gener­is) “polit­i­cal equal­i­ty” and a sin­gle inter­na­tion­al personality.

Speak­ing on the side­lines of the cel­e­bra­tions for the EU acces­sion of the Repub­lic of Cyprus, Pres­i­dent Christofias urged the Turk­ish gov­ern­ment to stop its “com­mu­ni­ca­tion tricks” and called on Eroğlu to respect all the con­ver­gences achieved with his pre­de­ces­sor.55Speech by Pres­i­dent Demetris Christofias, Nicosia, 01/05/2010. Invit­ed to com­ment over state­ments made by Turk­ish Deputy Prime Min­is­ter Ali Baba­can, who said that Turkey would like to see a solu­tion in Cyprus before the end of 2010, Christofias stat­ed: “We want a solu­tion yes­ter­day”. He then stressed that the Greek Cypri­ot side obvi­ous­ly wants a solu­tion before then; that the prob­lem is under what instruc­tions Turkey is guid­ing Turk­ish Cypri­ot nego­tia­tors; and that the solu­tion must serve the peo­ple of Cyprus, being fair, viable, and functional.

Anoth­er cru­cial issue on the Cypri­ot (gov­ern­men­tal, polit­i­cal, and civ­il soci­ety) agen­da is the “Direct Trade Reg­u­la­tion”. This EU-led ini­tia­tive aims at direct trade between the Turk­ish-occu­pied areas and the EU. How­ev­er, it is in man­i­fest breach of Pro­to­col 10 of Cyprus’ 2003 Acces­sion Treaty. There­fore, Nicosia argues that it should be with­drawn, or at least frozen; oth­er­wise, the issue should be referred to a Euro­pean Par­lia­men­tary Com­mit­tee, which would be most com­pe­tent to address it. The Cypri­ot Pres­i­dent also pro­posed that trade with the Turk­ish Cypri­ot com­mu­ni­ty be con­duct­ed through the port of Fam­a­gus­ta, under the aegis and mon­i­tor­ing of the EU, in return for the open­ing of the fenced (i.e., occu­pied) city of Varosha. This pro­pos­al, he added, was the government’s response to the insis­tence by Turkey “and by some cir­cles with­in the Euro­pean Par­lia­ment and the Com­mis­sion” to bring for­ward a reg­u­la­tion that, under nor­mal cir­cum­stances, should not only be frozen but nul­li­fied. As report­ed by ANTENA TV, the Pres­i­dent argued that it is unac­cept­able for the EU to raise such an issue which vio­lates its own prin­ci­ples, espe­cial­ly when the Cyprus gov­ern­ment is dis­play­ing a con­struc­tive stance in the UN nego­ti­a­tions, while dai­ly news­pa­per Simeri­ni report­ed Christofias’ state­ment that the admin­is­tra­tion of Cyprus’ prob­lems should nev­er have been han­dled by DG Enlarge­ment, giv­en that Cyprus has been a full mem­ber state since 2004.66State­ments by Pres­i­dent Christofias, Brus­sels, 17/06/2010 and 18/06/2010 (as report­ed by ANTENA TV and SIMERINI news­pa­per respectively).

Author­i­ties’ efforts have also focused on mea­sures to over­come a bud­get deficit of 6.9 per­cent, high unem­ploy­ment (esti­mat­ed in April 2010 at 6.8 per­cent) and the ris­ing pover­ty lev­els in the midst of the glob­al finan­cial cri­sis.77Fig­ures pub­lished at the web­site of the Sta­tis­ti­cal Ser­vice of the Repub­lic of Cyprus, avail­able at: http://www.mof.gov.cy/mof/cystat/statistics.nsf/index_en/index_en. In June 2010, the Euro­pean Com­mis­sion acti­vat­ed the pro­ce­dure for exces­sive deficit for Cyprus, call­ing on the coun­try to reduce its bud­get deficit below 3 per­cent until the end of 2012. Cyprus will have six months fol­low­ing the adop­tion of the rec­om­men­da­tions by Ecofin in which to present mea­sures for the reduc­tion of its deficit, some­thing which entails the adop­tion of aus­ter­i­ty measures.

Min­is­ter of Finance, Char­i­laos Stavrakis, described the above devel­op­ment as “pure­ly tech­ni­cal”, point­ing out that Cyprus was among the last mem­bers of the Euro­zone to come under the pro­ce­dure for exces­sive deficit.88Press Reports, June 2010. Oppo­si­tion par­ty DISY, how­ev­er, voiced anew its crit­i­cism that the gov­ern­ment, instead of focus­ing on reduc­ing its spend­ing and boost­ing devel­op­ment and growth, focus­es on boost­ing its rev­enue through addi­tion­al tax­es (announced ear­li­er that day),99The pack­age of mea­sures, announced by Min­is­ter of Finance Char­i­laos Stavrakis on 16 June 2010, cov­ers four main axes of pol­i­cy which con­cern the clean-up of pub­lic finances, social sol­i­dar­i­ty, the tar­get­ing of social ben­e­fits and the boost in gov­ern­ment rev­enue. The leg­is­la­tions approved by the Cypri­ot Cab­i­net include the increase of cor­po­rate tax by 1 per­cent to 11 per­cent for 2010 and 2011 only, the adjust­ment of prop­er­ty tax brack­ets and the impos­ing of 0.7 per­cent in tax to prop­er­ties over 170,000 Euros in val­ue cal­cu­lat­ed in 1980 prices, and the amend­ment to the ceil­ing income for eli­gi­bil­i­ty for child and stu­dent ben­e­fits from 60,000 Euros per annum per two child fam­i­ly to 70,000 Euros per annum with the mea­sure com­ing into effect as of 2011. Also announced was an increase to the lev­el of tax on fuel prod­ucts to lev­els which the min­is­ter of Finance stressed are the min­i­mum per­mit­ted by the EU. a posi­tion also expressed by gov­ern­ment coali­tion-par­ty DIKO. Both par­ties empha­sised the need for a focus on devel­op­ment and stressed the risks of impos­ing addi­tion­al tax­es at a time of eco­nom­ic cri­sis. Social-demo­c­ra­t­ic EDEK and the Greens also expressed con­cern over the Com­mis­sion announce­ment, call­ing for imme­di­ate action to con­trol the bud­get deficit, and crit­i­cised the mea­sures announced by the gov­ern­ment, while the Euro­pean Par­ty (EVROKO) – which called the announce­ment of mea­sures “rushed” and dam­ag­ing to Cyprus’ efforts to become a region­al busi­ness cen­tre – accused the gov­ern­ment of hav­ing turned an econ­o­my with a sur­plus in 2008 to an econ­o­my that has now fall­en under EU monitoring.

Giv­en the aus­ter­i­ty mea­sures tak­en by the Cypri­ot gov­ern­ment, Cypri­ots seemed rather pes­simistic regard­ing issues like unem­ploy­ment and the rise of pover­ty lev­els. Accord­ing to a Euro­barom­e­ter sur­vey on the eco­nom­ic cri­sis’ social impact, 30 per­cent of Cypri­ots said that they are strug­gling to bal­ance their income and expen­di­ture, while eight in ten per­ceive an increase in pover­ty.1010Euro­barom­e­ter: Flash Euro­barom­e­ter. Mon­i­tor­ing the social impact of the cri­sis: pub­lic per­cep­tions in the Euro­pean Union – Wave 4, June 2010, avail­able at: http://ec.europa.eu/public_opinion/flash/fl_289_en.pdf (last access: 08/07/2010). Half of the Cypri­ots sur­veyed expect the sit­u­a­tion to dete­ri­o­rate fur­ther in the com­ing year; one in four expects that pen­sions will decrease; one in ten expects to retire at a lat­er age; while one in five is con­cerned that post-retire­ment income will not suf­fice for a “respectable” lifestyle. Also, 20 per­cent replied that they feel anx­ious about job secu­ri­ty, while six in ten Cypri­ots fear an inabil­i­ty to find a new job if they lose their cur­rent positions.

Mean­while, Nicosia is mobil­is­ing efforts to attract for­eign investors. Recent­ly, the gov­ern­ment of Qatar expressed inter­est in form­ing a con­glom­er­ate with the Cypri­ot gov­ern­ment for the con­struc­tion of a lux­u­ry hotel and a major busi­ness cen­tre in Nicosia. The agree­ment will reach 500 mil­lion US Dol­lars and will mark the first time that Cyprus receives a direct invest­ment of such mag­ni­tude.1111Press Reports, May-June 2010. Where­as polit­i­cal and busi­ness cir­cles wel­comed the sign­ing of two busi­ness agree­ments between Cyprus and Qatar, oppo­si­tion par­ties expressed con­cerns over the imple­men­ta­tion of the deal, fear­ing it could lead Cyprus into dan­ger­ous adven­tures.1212Ibid. Oppo­si­tion DISY deputy pres­i­dent, Averof Neo­phy­tou, even assert­ed that the agree­ments were unbal­anced against the Cyprus gov­ern­ment and chal­lenged it to show greater trans­paren­cy. Despite this oppo­si­tion, a com­mit­tee was formed regard­ing the project, which is antic­i­pat­ed to be com­plet­ed in two years, but it is doubt­ful whether it would be ready for the Cypri­ot EU Pres­i­den­cy in 2012.1313Press Reports, June 2010.

Final­ly, while a finan­cial-cri­sis-induced melan­choly penum­bra is tem­porar­i­ly affect­ing the Cypri­ot atmos­phere, life in the free part of the Repub­lic is pro­found­ly marked by Cyprus’ “exis­ten­tial prob­lem”. There­fore, beyond the afore­men­tioned par­tic­u­lar devel­op­ments regard­ing the Cyprus prob­lem, a few wider remarks are worth record­ing. First, Cypri­ot aca­d­e­m­ic com­men­ta­tors and dis­tin­guished colum­nists have been con­cerned about Ankara’s increas­ing region­al assertive­ness, which seems to be issued from grandiose geopo­lit­i­cal ambi­tions and designs of even “glob­al” dimen­sions. The impli­ca­tions for the Repub­lic of Cyprus are both indi­rect and imme­di­ate: as implied in Turk­ish For­eign Min­is­ter Ahmet Davoutoglu’s opus, “Strate­gic Depth”,1414Davoutoglu’s book was pub­lished in Greek trans­la­tion in May 2010. Nicosia was the locus for the book’s first pub­lic pre­sen­ta­tion. The mas­sive atten­dance of the pre­sen­ta­tion attests to the con­cerns expressed in the present para­graph. Cyprus is per­ceived – and should be con­ceived – by Ankara in pure­ly geopo­lit­i­cal and geostrate­gic terms. It seems to fol­low that Turkey is advised to not be pre­pared to set­tle the Cyprus prob­lem unless it sat­is­fies its self-regard­ing con­di­tions and terms. By impli­ca­tion, the term “bi-com­mu­nal nego­ti­a­tions in Cyprus” bor­ders on a ver­i­ta­ble mis­nomer. For, as not­ed by Cypri­ot polit­i­cal lead­ers and even Pres­i­dent Christofias, the rep­re­sen­ta­tives of the Turk­ish Cypri­ots are not autonomous nego­tia­tors, since they are con­stant­ly “guid­ed by Ankara”. There­fore, the sus­pi­cion that these “nego­ti­a­tions” are pur­sued by Turkey for mere­ly “com­mu­ni­ca­tion pur­pos­es” seems valid. In con­se­quence, the expec­ta­tion that such “bi-com­mu­nal talks” can lead to respectable results seems illusory.

Sec­ond, Pres­i­dent Christofias’ above-men­tioned “gen­er­ous gifts” were nev­er rec­i­p­ro­cat­ed by the Turk­ish Cypri­ots. There­fore, most polit­i­cal lead­ers, aca­d­e­m­ic ana­lysts, and influ­en­tial opin­ion-mak­ers have been call­ing on the Pres­i­dent to with­draw, at long last, his offer. His refusal to do so to date may large­ly explain the increas­ing unpop­u­lar­i­ty of his han­dling of these negotiations.

Third, eval­u­at­ing Ankara’s recent for­eign pol­i­cy has led Cypri­ot polit­i­cal ana­lysts, aca­d­e­mics, and pub­lic opin­ion-mak­ers to con­clude that Turkey is not always pre­pared to match words with deeds. Indeed, while Davoutoglu’s favourite stereo­types are “zero prob­lems with our neigh­bours” and “Turkey is a region­al peace­mak­er”, Ankara’s prob­lems aris­ing from, or con­cern­ing, Arme­nia, Azer­bai­jan, Iran, Syr­ia, Israel, Greece, and Cyprus may suf­fice to show a grand con­tra­dic­tion. There­fore, there is a ris­ing Cypri­ot sen­ti­ment to the effect that since Nicosia’s appar­ent­ly unsuc­cess­ful strat­e­gy has been premised exclu­sive­ly on “car­rots”, it is about time that its own – diplo­mat­ic, polit­i­cal and legal – “sticks” should also be deployed.

And fourth, this pic­ture helps explain the call by all polit­i­cal forces (except gov­ern­ing AKEL) for a recon­sid­er­a­tion of Nicosia’s nego­ti­at­ing strat­e­gy. Such a change was lacon­i­cal­ly expressed in a recent op-ed essay by for­mer For­eign Affairs Min­is­ter Gior­gos Lil­likas, who con­clud­ed as fol­lows: “The black­mail­ing dilem­ma that some [cir­cles] are cre­at­ing is, in real­i­ty, this: ‘Legal par­ti­tion with Turk­ish con­trol even of the free ter­ri­to­ry and with­out the inter­na­tion­al­ly recog­nised Repub­lic of Cyprus or ille­gal par­ti­tion?’ Clear­ly, both options are entire­ly unac­cept­able. Who­ev­er offers only these options push­es the peo­ple to the sec­ond option, sim­ply in order to retain at least our state enti­ty. Our peo­ple deserve bet­ter options. This, how­ev­er, pre­sup­pos­es a dif­fer­ent strat­e­gy that claims our rights and a dif­fer­ent, mul­ti-dimen­sion­al, for­eign pol­i­cy.”1515Gior­gos Lil­likas: Par­ti­tion or Bi-zon­al and Bi-Com­mu­nal Fed­er­a­tion?, Phileleft­heros (Nicosia dai­ly), 03/06/2010, empha­sis added.

    Footnotes

  • 1Press Reports, April 2010.
  • 2Press Reports, April 2010.
  • 3Press Reports, April 2010.
  • 4Inter­views con­duct­ed by Nico­le­ta Athanasi­adou, Min­istry of Agri­cul­ture, Nat­ur­al Resources and the Envi­ron­ment, Nicosia, ear­ly June 2010.
  • 5Speech by Pres­i­dent Demetris Christofias, Nicosia, 01/05/2010.
  • 6State­ments by Pres­i­dent Christofias, Brus­sels, 17/06/2010 and 18/06/2010 (as report­ed by ANTENA TV and SIMERINI news­pa­per respectively).
  • 7Fig­ures pub­lished at the web­site of the Sta­tis­ti­cal Ser­vice of the Repub­lic of Cyprus, avail­able at: http://www.mof.gov.cy/mof/cystat/statistics.nsf/index_en/index_en.
  • 8Press Reports, June 2010.
  • 9The pack­age of mea­sures, announced by Min­is­ter of Finance Char­i­laos Stavrakis on 16 June 2010, cov­ers four main axes of pol­i­cy which con­cern the clean-up of pub­lic finances, social sol­i­dar­i­ty, the tar­get­ing of social ben­e­fits and the boost in gov­ern­ment rev­enue. The leg­is­la­tions approved by the Cypri­ot Cab­i­net include the increase of cor­po­rate tax by 1 per­cent to 11 per­cent for 2010 and 2011 only, the adjust­ment of prop­er­ty tax brack­ets and the impos­ing of 0.7 per­cent in tax to prop­er­ties over 170,000 Euros in val­ue cal­cu­lat­ed in 1980 prices, and the amend­ment to the ceil­ing income for eli­gi­bil­i­ty for child and stu­dent ben­e­fits from 60,000 Euros per annum per two child fam­i­ly to 70,000 Euros per annum with the mea­sure com­ing into effect as of 2011. Also announced was an increase to the lev­el of tax on fuel prod­ucts to lev­els which the min­is­ter of Finance stressed are the min­i­mum per­mit­ted by the EU.
  • 10Euro­barom­e­ter: Flash Euro­barom­e­ter. Mon­i­tor­ing the social impact of the cri­sis: pub­lic per­cep­tions in the Euro­pean Union – Wave 4, June 2010, avail­able at: http://ec.europa.eu/public_opinion/flash/fl_289_en.pdf (last access: 08/07/2010).
  • 11Press Reports, May-June 2010.
  • 12Ibid.
  • 13Press Reports, June 2010.
  • 14Davoutoglu’s book was pub­lished in Greek trans­la­tion in May 2010. Nicosia was the locus for the book’s first pub­lic pre­sen­ta­tion. The mas­sive atten­dance of the pre­sen­ta­tion attests to the con­cerns expressed in the present paragraph.
  • 15Gior­gos Lil­likas: Par­ti­tion or Bi-zon­al and Bi-Com­mu­nal Fed­er­a­tion?, Phileleft­heros (Nicosia dai­ly), 03/06/2010, empha­sis added.

The reports focus on a report­ing peri­od from Decem­ber 2009 until May 2010. This sur­vey was con­duct­ed on the basis of a ques­tion­naire that has been elab­o­rat­ed in March and April 2010. Most of the 31 reports were deliv­ered in May 2010.

The EU-27 Watch No. 9 receives sig­nif­i­cant fund­ing from the Otto Wolff-Foun­da­tion, Cologne, in the frame­work of the ‘Dia­log Europa der Otto Wolff-Stiftung’, and finan­cial sup­port from the Euro­pean Com­mis­sion. The Euro­pean Com­mis­sion is not respon­si­ble for any use that may be made of the infor­ma­tion con­tained therein.