With the Turkish-Cypriot leadership elections tomorrow, the future of the Cypriot negotiations is under question. It is clear from the candidates’ platforms that a victory for incumbent Mehmet Ali Talat will make it easier and quicker to reach a deal on a true federal state. But alongside this, far from the island, Brussels has won a chance to push for a breakthrough on Cyprus as an unexpected consequence of the European Union’s new Lisbon Treaty. If the EU seizes this opportunity to keep its previously broken promise of direct Turkish-Cypriot trade with EU states, and make amends with Turkish Cypriots, it could re-energize the vital but struggling talks on a Cyprus settlement. And along the way, it could undo one of the principal knots that hamstring Europe’s relationship with Turkey. Today, Turkish Cypriots cannot directly trade with the EU, even though they are technically European citizens. This could change under the new Lisbon Treaty, which gives the European Parliament a co-decision-making role in trade agreements. A «Direct Trade Regulation» for Turkish Cypriots, first suggested by the European Council in April 2004 but blocked by Greek Cypriots since Cyprus joined the EU a month later, now has a chance of moving forward. As a pending trade deal, the measure was automatically reintroduced to the European Parliament on March 1 and will be under active consideration in the coming months. The European Commission has long believed the trade measure is the right thing to do, but as one official in Brussels put it, «Frankly, this consequence of Lisbon caught us all on the hop.» Direct trade Direct trade is no alternative for a comprehensive settlement to create a bicommunal, bizonal federal state. But by helping to break the isolation of the Turkish Cypriots, it could make them more trusting of their Greek-Cypriot compatriots and more willing to compromise on hard-to-resolve aspects of the settlement. Since intensive negotiations began in 2008 between Greek-Cypriot President Dimitris Christofias and his Turkish-Cypriot counterpart Mehmet Ali Talat, there has been progress, slow but remarkable nevertheless. For instance: Some 70 rounds of talks over two years between the Greek- and Turkish-Cypriot leaders have sketched out many more areas of understanding than most Cypriots probably realize. The process has produced joint statements of political goals, contributed to a normalized atmosphere on the island and resulted in the opening of one busy new crossing point between the two communal zones and work on opening another soon. The current governments of Turkey and Greece are both pressing strongly for a settlement in constructive ways rarely seen before. Since February, top Turkish leaders have for the first time met with Greek-Cypriot civil society groups directly and continue to seek engagement. The Greek-Cypriot Orthodox Church, a leading opponent of compromise in the past, has broken taboos to initiate contact with Ankara, with the Greek-Cypriot archbishop being welcomed in the Turkish-Cypriot zone and planning a visit to Turkey to meet with officials. Recent judgments on property compensation, one in the European Court of Justice that favors Greek-Cypriot arguments and one in the European Court of Human Rights that favors Turkish-Cypriot arguments, have shown both sides that time is not on their side and a rapid political settlement is by far the best solution to resolve property disputes. Frozen out The direct trade regulation issue dates back to April 2004, when the European Union wanted to reward the Turkish Cypriots for voting 65 percent in favor of a referendum on the UN-mediated Annan Plan to reunify the island. In the same referendum, 76 percent of Greek Cypriots voted against the plan, even though it was backed by the United Nations, the US, Turkey and the European Union itself. Turkish Cypriots were thus unjustly left out in the cold. Longstanding EU politics – and Turkey’s steadfast refusal before 2003 to brook much compromise – had made it inevitable that the EU would accept the membership of Cyprus one week after the referendum, even though it is to all intents and purposes run solely by the Greek Cypriots, who make up four-fifths of the island’s 1 million people. It is worth recalling what EU governments wanted for the Turkish Cypriots when they gathered for a European Council meeting on April 27, 2004. They expressed «strong regret» that Cyprus had not been unified before accession; noted that they were «determined to put an end to the isolation of the Turkish-Cypriot community» who had «expressed their clear desire for a future within the EU» – and said this to send a «signal of encouragement» to Turkish Cypriots. The Council then «invited the Commission to bring forward comprehensive proposals to this end, with particular emphasis on the economic integration of the island and on improving contact between the two communities and with the EU.» This was done on July 7, 2004, in a European Commission proposal of a preferential regime for Turkish-Cypriot goods entering the EU customs territory (with exceptions such as animals and animal products), and including the acceptance of the Turkish-Cypriot Chamber of Commerce’s authority to certify origin (a group separate from the Turkish-Cypriot administration). The proposal took further note of UN Secretary-General Kofi Annan’s May 28, 2004 recommendation that UN Security Council members «give a strong lead to all states to cooperate both bilaterally and in international bodies to eliminate unnecessary restrictions and barriers that have the effect of isolating the Turkish Cypriots and impeding their development.» The proposed Direct Trade Regulation has however been blocked by the Republic of Cyprus ever since it joined the EU on May 1, 2004. Officially, the Greek Cypriots’ opposition is a dispute over the proposal’s legal basis. They see it as a fundamental Cyprus matter, falling under Protocol 10 of the Accession Treaty, which would require European Council unanimity to change. In an August 25, 2004 opinion, the European Council’s legal service agreed. The European Commission’s legal service disagreed, backing the Commission’s view that Turkish-Cypriot trade came under Article 133 of the old treaty (now Article 207 of the Lisbon Treaty), which regulates EU’s trade with third countries and territories. Even though such opinions are nonbinding, other EU states were reluctant to challenge Cyprus on the issue and the trade resolution became stuck in limbo. ECJ impact This has left the Turkish Cypriots in the same difficulty they have experienced since 1994 when Greek Cypriots won a case in the European Court of Justice against Turkish Cypriot exporters (triggered by the Turkish Cypriots’ ill-advised decision to change their pre-1974 Republic of Cyprus export authorization stamps). The ECJ decision did not ban Turkish-Cypriot products, but made them more expensive by removing their preferential tax rate. It also made Turkish Cypriots dependent on Greek-Cypriot authorities for certain certificates, hard or impossible to get without a political settlement. The result was a drop in the EU’s share of Turkish-Cypriot exports from 78 percent in 1990 to just over 20 percent in 2008. This led to the loss of many Turkish-Cypriot jobs in agriculture and textiles, drove a new wedge between Turkish Cypriots and Europe and increased their dependence on Turkey. Due to a variety of technical, political and psychological pressures, the post-2004 Green Line Regulation on intra-island trade, which allows Turkish Cypriots to export through southern ports, has also done almost nothing to improve their access to EU markets. European interest Now that the European Commission has asked the European Parliament to reconsider the matter, the parliament has appointed a rapporteur to look into the Direct Trade Regulation, will discuss his report and give its opinion. If successful, it will be sent to the Council. EU officials expect the measure to pass Parliament but are unsure if the measure will attract the necessary firm «yes» from a qualified majority in the Council. The entire process will likely take a few months. The Republic of Cyprus, taken by surprise like everyone else, says, «Our policy has not changed.» The Greek-Cypriot government spokesman has reassured the Greek-Cypriot public that their MEPs are working in Brussels to stop any new trade regulation going through. But while opposition to the measure is understandable in the context of the old-style diplomatic trench warfare in the Cyprus dispute, the best interest of the Greek Cypriots now is to let it pass. Greek Cypriots’ fears that Turkish Cypriots want to use direct trade to reach recognition as an independent state are exaggerated. Even Turkey, the only country that has ever recognized the Turkish Cypriots’ breakaway state, has stopped advocating for international recognition of the entity. Instead, it fully supports the bicommunal, bizonal federal solution. Turkey’s Prime Minister Recep Tayyip Erdogan has reached out to Greek Cypriots, trying to build trust, most recently in a February meeting in Istanbul with six prominent members of Greek-Cypriot civil society, including three journalists, Cyprus’s former EU negotiator, an academic and a party leader who was previously head of Cyprus’s Central Bank. In his usual blunt manner, and thanks to this rare moment of direct communication, Erdogan left his visitors in no doubt that Turkey’s priority is a Cyprus settlement, after which Turkey will withdraw its troops and implement any deal reached by the parties involved. Such undertakings are not lightly given, as some Greek-Cypriot leaders allege. Erdogan was reading from talking points drawn up by the Turkish Foreign Ministry, a pillar of the Turkish establishment. Privately, Turkish officials also clearly say they want to instigate a process of negotiation with the Greek Cypriots, Greece and the Turkish Cypriots, including a discussion on replacing the controversial old Treaty of Guarantee in a way that will reassure all sides on the sensitive matter of implementing the agreement and the island’s future security. Turning point? Greek Cypriots, as well as European parliamentarians, now have a chance to trigger a virtuous circle. Approving the trade regulation would turn around Turkish-Cypriot opinion, increasingly cynical and disillusioned about reunification. It would also challenge Ankara to fulfill its promise to respond by opening its ports to Greek-Cypriot ships and aircraft, as it is obliged to do under the Customs Union it signed with the EU in 2005. Turkey’s chief EU negotiator Egemen Bagis again said on March 25 that «if the EU implements the regulation, we will open our ports,» a position confirmed by Turkish diplomats. If Turkey does open its ports, the EU would then be morally obliged to lift its related 2006 block on eight of Turkey’s 35 EU accession negotiating chapters, thus reassuring Turkey about its EU membership perspective. Finally, a Turkey with an open road in its EU talks will be even more ready to reach a compromise settlement with the Greek Cypriots. (As things stand, Turkey has opened only 12 chapters and has only four more difficult ones available to open, and its EU process is close to a standstill.) There is still a chance for a bicommunal, bizonal solution to work. When asked how Turkey could show its sincerity and commitment to a solution, Greek-Cypriot officials often answer: «By fulfilling its Customs Union obligations.» Letting the EU pass this trade regulation would be the best way to make that happen. * Hugh Pope is director and Didem Akyel is research assistant in the International Crisis Group’s Turkey/Cyprus Project.