As prepared for delivery...

February 22, 2006

The United States and Cyprus:
Building a Common Vision of the Future

Remarks by Ambassador Schlicher at the Cyprus American Business Association Dinner

Hilton Hotel, Nicosia

Thank you Mantos, Chris, and Kyriakos. I am very pleased to be here with the Cyprus American Business Association, an important Embassy partner. CyABA calls itself the " Cyprus-American Business Bridge," and I would like to applaud Kyriakos, the board of directors, and all of CyABA's members for their important contributions to U.S.-Cyprus cooperation.

I very much enjoyed meeting many of you at last month's speech by Dr. Patterson and look forward to deepening my relationship with the American business community over the next three years. Nothing pleases me more than hearing of your successes and helping you to create new opportunities for growth. The Embassy is a resource to American business, and we stand ready to help as you build bridges between our two communities.

I also am very pleased to be here on Cyprus. I first became interested in this beautiful island when I passed through 10 years ago while I was assigned to Lebanon. I was struck by the natural beauty, the rich history, the welcoming climate, the varied culture, the political situation, and, of course, the people. I asked (and fought) to come to Cyprus and feel very fortunate that I got my wish.

Inevitably one of the first topics my new friends bring up is the Cyprus issue. The Cyprus issue is fundamentally important. It is the 800-pound gorilla in the room that is impossible to ignore. And I will address it in a few minutes.

But first I want to stress that the Cyprus issue does not define the entirety of the U.S.-Cypriot relationship. The relationship between the United States and Cyprus is deeper and richer than the single issue of the island’s unacceptable division. We cooperate on many levels on many issues.

Of foremost interest to this group is our strong commercial and trade relationship, which owes a lot to the hard work of the people assembled here. In spite of the thousands of miles that separate us, the U.S. is Cyprus's eleventh largest source of imports and ninth largest export market. According to the U.S. Department of Commerce, in 2004 the U.S. exported 96 million dollars worth of goods to Cyprus and imported 26 million dollars worth of goods. Figures for the first 9 months of 2005 show that we should roughly reach those levels again this year with exports of goods of 61 million dollars from January to September and imports of 22 million. These numbers, however, are dwarfed by the trade in services. Preliminary Cypriot statistics show that in 2005 the U.S. exports of services to Cyprus totaled 630 million dollars, while the U.S. imported 388 million dollars worth of services from the island.

In the wake of your accession to the EU and the removal of many outdated restrictions, U.S. investment in Cyprus is also growing. In 2004, the U.S. accounted for around 8 percent of the foreign direct investment into Cyprus, with total investments worth over 80 million dollars. Although figures are not yet in, this trend appears to have continued in 2005, including a large U.S. investment in a major luxury health spa project. We are also pleased that major U.S. companies continue to compete for government tenders especially in the energy, tourism, and infrastructure fields, and I hope to see more U.S. companies winning major tenders in the future, especially in the energy and tourism fields.

Our commercial relationship is strong and continues to flourish, but I would like to see it grow even stronger. Should you know of any tenders or significant business opportunities that might interest U.S. companies, please let us at the embassy know and we can advertise the project back to thousands of U.S. firms. Similarly, if you are interested in importing or distributing U.S products, please contact us and we can help you reach out to U.S. exporters. Last year, the U.S. pavilion was the second largest national pavilion at the Cyprus International Fair, and we invite any businesses seeking to promote U.S. products to participate again this year.

CyABA has identified enforcement of intellectual property rights as a priority issue, and I am pleased that the Embassy has been able to support CyABA's efforts on this topic. Strong enforcement of intellectual property rights, including meaningful and deterrent enforcement against piracy and counterfeiting, is vital to promoting the creativity and innovation of local entrepreneurs. It is also critical if Cyprus is to meet its own goal of establishing itself as a regional high-tech center. While there has been significant progress over the past few years, especially thanks to the hard work of Customs and the Police, much remains to be done in this field. The International Intellectual Property Alliance has consistently raised concerns about Cyprus's level of enforcement with optical disk and software piracy rates of over 50 percent. The Business Software Alliance also recently ranked Cyprus 21 st out of the 25 EU members in terms of its level of IPR protection.

The Embassy and CyABA have worked together to co-organize two seminars on IPR in Cyprus, including one last November. The seminars have sought to improve coordination between the public and private sector and among government agencies. They have also identified specific suggestions on ways to improve IPR enforcement. Cyprus's obligation to enact legislation to implement the EU Enforcement Directive by late April of this year provides Cyprus with a golden opportunity to introduce several of the seminar's recommendations, including reducing the burden of proof in IPR-related prosecutions. In practice, this would mean that vendors would need to be able to demonstrate that they have purchased their wares from legitimate sources rather than requiring the authorities to prove that every suspect item is counterfeit.

The thriving academic exchanges between our two communities further contribute to our robust and healthy relationship. For 43 years, Americans and Cypriots have shared experiences, education, traditions, and culture through organized exchanges. Thanks to our Cyprus America Scholarship and Fulbright Programs, Cyprus has had over the years the largest per capita scholarship program to the U.S. of any country in the world. In fact, the United States Government has provided more direct funding than any other foreign government (excluding Greece and Turkey) for the education of Cypriots. The Fulbright program and the Cyprus America Scholarship Program have sponsored nearly 2,400 Cypriots for academic study in the United States. In addition, about 3,700 Cypriots have participated in various workshops, seminars and youth camp programs. Those exchanges -- supported by an almost 5 million dollar annual investment by the United States as well as by contributions from the Republic of Cyprus, 660,000 dollars in 2003 -- have enriched both societies.

I am also pleased that the U.S. and Cyprus cooperate closely in the war on terrorism, and my government greatly appreciates the excellent cooperation the Embassy has received from the Cypriot government on this front. Last year the U.S. Treasury's Financial Crimes Enforcement Network and MOKAS signed a Memorandum of Understanding formalizing our already excellent cooperation on fighting terrorist finance and money laundering. We also regularly cooperate on a wide array of law enforcement matters, including the extradition of third country nationals; and just last month, our two governments signed an agreement updating our Mutual Legal Assistance agreement.

We are also working with the government to enhance our collective ability to protect our borders, deter terrorists, improve emergency preparedness, and combat the proliferation of weapons of mass destruction. We have helped Cyprus establish and train an anti-smuggling customs team with radiation portal monitors to detect smuggling of radioactive materials into Cyprus. We held a major inter-agency training session last year to help first responders organize themselves in the event of a chemical, biological, or radiological incident. We have conducted additional training in hazardous material handling. Cyprus has endorsed the principles of the multinational Proliferation Security Initiative, and in 2005 we signed a mutual ship-boarding agreement – the first with an EU member state. Just last week a U.S. Navy ship visited Limassol. The first such visit in 5 years.

We also regularly cooperate with Cyprus as an important partner within the larger transatlantic relationship. By joining the European Union, Cyprus became part of the U.S.-EU partnership, the largest trade relationship -- and arguably the most important political relationship -- in the world. There is almost no issue on the world stage that we do not discuss with the European Union and its member states, including Cyprus. From the type of wood that is used in packing crates to how to control the drug trade in Colombia, if it is part of the U.S.-EU dialogue, it is part of the U.S.-Cypriot dialogue.

Since this is primarily a business audience, let me say one more thing on trade between the U.S. and EU. Despite the impression sometimes conveyed in the press that our two-trillion dollar trade and economic relationship is innately conflictual, nothing could be further from the truth. While the U.S. and EU do sometimes directly compete, in the overwhelming majority of cases, the U.S. and EU are partners, not rivals. Well over 97 percent of the economic transactions between the U.S. and EU occur without difficulties, problems, or rancor, creating a great deal of interdependence between our two economies. In a relationship of this size, it is inevitable that some disagreements will arise. The key is to handle these problems quickly and responsibly. The U.S. and EU are working together to find ways to further strengthen our relationship, including working toward regulatory convergence. To this end, we have asked all stakeholders and businesses for additional ideas on how we can further remove barriers to transatlantic trade and would welcome your views and thoughts.

Both bilaterally and through the EU, Cyprus is acting as a full partner with the United States in addressing a broad range of global concerns, including terrorism, the proliferation of weapons of mass destruction, supporting democracy and development around the world, and meeting the long-standing challenges of AIDS and malaria as well as new global health threats such as avian influenza.  These issues will continue to be of outmost importance in the future; and throughout my tenure, I will work to deepen and broaden U.S.-Cypriot cooperation to ensure the safety and continued prosperity of both our peoples.

I am now more than half-way through the speech, and I have yet to discuss the Cyprus issue itself. This is not accidental. Too often, focusing on the Cyprus question obscures that fact that the United States and the Republic of Cyprus enjoy a rich relationship across the full spectrum of global issues. We agree on the vast majority of issues and we work together well and successfully on a bilateral basis, through the U.S.-EU relationship, and in the United Nations in pursuit of our shared goals.

On the Cyprus issue as well, there are some who are quick to highlight differences at the expense of commonalities. I firmly believe, however, that even on the Cyprus issue our points of agreement and our commonality of vision outnumber and outweigh those areas -- largely tactical in nature -- where we disagree.

The United States and Cyprus -- and here I mean both the Greek Cypriot and Turkish Cypriot communities as well as the government of the Republic of Cyprus -- want to see a solution to the long-standing and unacceptable division of the island on the basis of a bizonal, bicommunal federation. Everyone involved understands that a solution must be acceptable to clear majorities on both sides. All agree that a unified Cyprus must be in a position both to share equally in the benefits of EU membership and shoulder the responsibilities that membership entails.

Let me be absolutely clear about one point in particular. As far as the United States is concerned, the continued division of the island benefits no one. Rather, it is an obstacle to regional peace and security as well as a drag on economic growth and the advancement and protection of human rights. Those who suffer first and foremost from this conflict are, of course, the Cypriots themselves. But we all pay a cost for the division of Cyprus. For the United States, the costs are calculated in terms of the political capital we must expend on the issue, the real capital we must expend in financing a 40-year-old UN peacekeeping mission, the costs of managing Cyprus-specific tensions between two important American allies -- Greece and Turkey -- and the toll it takes on our bilateral relationship with the Republic of Cyprus, itself an important ally in the war on terror. The unresolved Cyprus dispute undercuts EU-NATO cooperation, restricts the ability of the ROC to participate fully in important multilateral institutions such as the Missile Technology Control Regime and the Wassenaar Arrangement, and complicates Turkey’s process of integration with the rest of Europe, a process we all agree is necessary to cement democratic and economic reforms in that country.

Conversely, a settlement would stand to benefit just about everyone. Cypriots would have their island back as a unified whole. Consistent with the terms of the agreement, the status of refugees and their properties would be clarified and settled, and far-sighted businessmen on both sides of the line would stand to gain from access to new markets and new opportunities. A Cyprus settlement would also smooth Turkey’s path to Europe, crown a successful UN peacekeeping and conflict-resolution effort, and remove a source of potential instability in a volatile part of the world.

In both theory and practice – as well as in logic – there is only one way to deal with the multiplicity of issues stemming from the unresolved Cyprus dispute. Fix it. Solve the root problem.

The United States wants a functional, viable Cyprus settlement supported by majorities on both sides that would reunite the island and create the opportunity for real reconciliation between Greek Cypriots and Turkish Cypriots. This is a simple truth, but it is an important one.

At the same time, I must emphasize that the responsibility for resolving the Cyprus issue rests squarely on the shoulders of the Cypriots themselves. The UN, the EU, and the U.S. are all interested parties who can be counted on to help support efforts to reach agreement on a settlement, but the ideas, the energy and the commitment that will drive this problem must come from Cypriots.

Relatively recent political developments on Cyprus provide reason to be hopeful. The opening of the crossing points in April 2003 and the nine million-plus peaceful crossings in both directions since have put to rest -- hopefully forever -- the baseless but frequently repeated myth that Greek Cypriots and Turkish Cypriots are better off apart than together. Moreover, dramatic democratic gains on the Turkish Cypriot side of the buffer zone since December 2003 have reshaped the Cyprus-issue dynamic. The school of political thought in Turkish Cypriot life fundamentally committed to the idea of a separate state and separate sovereignty for Turkish Cypriots has been moved aside. That school has been replaced by support for the reunification of the island and the reconciliation of the Greek Cypriot and Turkish Cypriot communities. There is a window of opportunity here that everyone working for a Cyprus settlement should seek to exploit. Those who minimize these developments are simply wrong. I urge my Greek Cypriot friends to seize the opportunity presented.

How do we do this?

Ultimately, we need a new UN-led process. No individual, organization, nation, or group of nations can replace the UN Mission of Good Offices. It is up to the parties to convince the Secretary General that a solution is achievable and that the key players are ready for the kinds of compromise that will be necessary to ensure a reasonable chance of success.

In moving forward, there is no substitute for dialogue. The Cyprus issue cannot be solved through force, fiat or litigation. It can only be resolved through compromise and accommodation. While we support the party-to-party contacts that have been taking place for some time, we also believe meaningful dialogue between representatives of the two communities, including at the leaders’ level, would add value to the process and move us closer towards a settlement.

We must all look for ways to overcome the current gridlock on the Cyprus issue. All ideas are welcome and all initiatives deserve serious consideration. It would be a mistake to dismiss any proposals out of hand. There is currently no active international process specific to the Cyprus issue. Changing that and re-energizing Cyprus diplomacy will require creative thinking, constructive dialogue and good will.

It is in that spirit that we welcomed the ideas that Turkish FM Gul put forward in January regarding the mutual easing of restrictions with respect to both trade relations between Cyprus and Turkey and the ability of Turkish Cypriots to engage directly with the wider world. We understand that Greek Cypriots have reservations about the specifics of the Turkish proposal, and we remain hopeful that the Greek Cypriot side can come forward with some ideas of its own in an effort to jump-start the dialogue process.

The government’s position is that any future Cyprus initiative must be well-prepared. We agree with that, and we are doing what we can to lay the groundwork for success. We are investing heavily in programs that promote contact and interchange of all kinds across the buffer zone. We are working to promote a reunified capital city through the Nicosia Master Plan, trade between Greek Cypriot and Turkish Cypriot businesses, and friendships between individuals. This last is particularly important for the young people of Cyprus, who have no personal memories of a unified island and often a one-sided view of history. Helping young people understand each other and appreciate the historical narrative of the other side is a vital component of reconciliation.

Our work directly with the Turkish Cypriot side through the Cyprus Partnership for Economic Growth further supports the goal of a settlement. Helping the Turkish Cypriots develop economically to the point where they will be better positioned to shoulder their share of the costs of a settlement can only be a plus in future negotiations. We do not want the Greek Cypriot side overburdened by the costs of settlement. Economic growth on the Turkish Cypriot side can only lower the ultimate costs for the far wealthier Greek Cypriot side.

Please allow me the luxury of repeating myself. The division of this island is dangerous and unacceptable. More importantly, it is wrong. A no-man’s land of razor-wire and land-mines guarded by soldiers in fortified bunkers runs through the center of Nicosia like an open wound. Without a solution, this wound will not heal. You have my personal commitment that I will do everything in my power to help heal this wound. I look forward to working with you, and it is my hope that the next few years will see a united and prosperous Cyprus working with the U.S. and the EU to promote peace and stability in the region. I thank you for your attention.