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Remarks by Ambassador Klosson

The Rotary Club
January 30, 2003

Good afternoon. I want to start by thanking the Rotary Club for giving me this opportunity to address your luncheon.  Service organizations like yours play a role in educating your communities about the important issues of the day.  I’d like to talk about some of those issues, and then take your questions.

As I look around the world, I see both historic challenges and historic opportunities.  On the positive side, freedom, democracy and market economies are advancing on many fronts.  NATO and the European Union are enlarging, thereby expanding the zone of peace, prosperity and security in Europe.  Here on the island, the ongoing search for a solution to the Cyprus problem looms large in people’s minds and in our conversations.  The U.S. actively supports the UN effort to help Cypriots achieve a comprehensive solution. 

On the other hand, there are challenges.  We are waging the war on terrorism.  The world is also watching closely developments in North Korea and Iraq. The September 11 terrorist attacks in New York have shown us all why the world must move swiftly to combat terrorists and deny them access to weapons of mass destruction.  The nexus of terrorists and weapons of mass destruction is the greatest danger of our age.  Baghdad’s drive to acquire such weapons thus affects people in Cyprus, in Europe, in the U.S. and across the globe.

We are undeniably living in a momentous age, a time of opportunities and challenges. 

Iraq

First, the challenges.  The United Nations Security Council is considering this week the UN chief weapons inspectors’ report on Iraq.  As long as Saddam Hussein is permitted to maintain an arsenal of weapons of mass destruction, to threaten his neighbors and to kill his opponents, this region will not see genuine peace and stability.  Saddam’s actions defy the United Nations.  Unchallenged, they will also threaten the integrity of the carefully built system of international law that exists today.

The international community must stand together and send a strong message to Iraq:  Saddam has a choice.  He can choose to comply voluntarily with U.N. resolutions.  Or he can choose not to comply, and leave the international community no option but to enforce U.N. resolutions with all the means necessary to secure Iraq’s compliance.

As President Bush has said repeatedly, the United States hopes for a peaceful solution. However, we must not mistake the will of the international community to see that this matter is resolved.  This will is reflected in U.N. Security Council Resolution 1441, which all the fifteen members of the Council adopted unanimously.  “The world,” President Bush said Tuesday, “has waited 12 years for Iraq to disarm.  America will not accept a serious and mounting threat to our country, and our friends and allies.  The United States will ask the U.N. Security Council to convene on February 5th to consider the facts of Iraq’s ongoing defiance of the world.”

Iraq is in material breach of Resolution 1441 now. In fact, Iraq is in material breach of sixteen U.N. Resolutions.  Resolution 1441 provides Iraq a final chance to fix the situation by voluntarily disarming.  It sets out the serious consequences for Iraq if Saddam Hussein fails to comply. 

The question is not, as some suggest, how much more time do the UN inspectors need.  The question is: will Saddam Hussein come clean and decide to disarm voluntarily his weapons of mass destruction? 

Countries that decide to disarm voluntarily declare publicly their intention to disarm.  They lead inspectors to weapons and production sites, answer questions before they are asked, and urge their citizens to cooperate.  That was what South Africa did in 1989 when it decided to dismantle its covert nuclear weapons program:  it destroyed its arsenal and gave IAEA inspectors complete access and all the documents they sought.  That’s also what the Ukraine and Kazakhstan did in the early 1990’s when they decided to rid themselves of nuclear weapons:  disarmament was orderly, open and fast.  

That is NOT what Iraq is doing.  As Dr. Blix said Monday, "Iraq appears not to have come to a genuine acceptance, not even today, of the disarmament that was demanded of it." Instead, Iraq has sought to conceal its weapons and production sites; it has sought to thwart the work of the inspectors whom it has branded “spies”; and it filed a false declaration to the United Nations.  Under cover of civilian production facilities, Iraq has rebuilt missile and biological weapons facilities damaged during previous coalition operations.   Furthermore, there are indications of renewed construction at sites previously associated with Iraq’s nuclear weapons program.

On January 23, the White House released a report listing things that Iraq has failed to account for or explain.  Let me read some of it for you, as it underscores the nature of the threat Iraq poses to the international community.

• Large quantities of anthrax and botulinum toxin;

• Ballistic missiles that exceed a U.N.-mandated range of 150 kilometers;

• Efforts to procure uranium from abroad for its nuclear weapons program;

• 1.5 tons of the powerful nerve agent VX;

• 550 mustard gas-filled artillery shells and 400 biological weapons-capable aerial bombs, and hundreds, possibly thousands, of tons of chemical precursors;

• 30,000 empty munitions that could be filled with chemical agents;

• An Unmanned Aerial Vehicle program designed to disperse chemical or biological agents;

• A mobile biological weapons agent facility.

Again, both President Bush and Secretary of State Powell have repeatedly said that they do not believe that military action against Iraq is inevitable. The international community, however, cannot continue to just wait while Iraq evades compliance.  Time is running out.   The U.N. Security Council has the responsibility under Resolution 1441 to bring Iraq into compliance with its obligations.   

Cyprus Solution

I said at the beginning of my remarks that we are living at a time of historic opportunity and challenge.  Having spoken about some of the challenges let me now talk about one of the important opportunities -- Cyprus. 

Cypriots across the island are approaching a crossroads.  One path offers an historic opportunity to achieve what has eluded both sides for decades:  a just, peaceful and durable settlement that secures the future of their families and generations to come.  A negotiated agreement that embraces this future, enabling a unified Cyprus to join the European Union, is possible.  And what a remarkable achievement that would be for all Cypriots and their leaders!

We understand the way to an agreement is not easy and the process still faces difficulties.  Developments over the past few months have produced much discussion among both Turkish Cypriots and Greek Cypriots.  Although views about the nature of the best solution vary, there is no doubt that majorities on both sides want a solution. 

The overall prospects for a Cyprus settlement are more encouraging now than perhaps at any point in the past.  The United States Government, at the highest level, is actively engaged in supporting the UN-sponsored talks, both on the island and through discussions with Ankara, Athens, and other interested parties.  Although we have many international priorities, a Cyprus settlement is one of them.  We are determined to leave no stone unturned and will actively support the UN Secretary General whenever he requests our support.

We believe an agreement is possible between now and February 28, if both sides demonstrate the willingness to find common ground, the readiness to give as well as get, and the courage to make difficult decisions. There is enough time to seize this opportunity, but no time to lose.

We urge all sides to intensify their efforts towards reaching a solution based on the U.N.’s settlement proposal.  It is fair and well crafted to balance the concerns of both Turkish Cypriots and Greek Cypriots, and it provides the basis for a negotiated settlement.  

From the perspective of Turkish Cypriots, the plan, as drafted, provides for a Turkish Cypriot component state that is self-administered and the political equal of the Greek Cypriot component state.  Most functions of government that directly shape the daily life of individuals – education, health, commerce, agriculture, tourism, social security and labor, and law and order – are in the hands of the two component states.  The plan provides for significant Turkish Cypriot representation in common state legislative and executive institutions.  The plan also provides for three years of safeguard measures, which may be prolonged, in the event that the free movement of goods, persons, services and capital threatens to cause serious economic difficulties in the Turkish Cypriot component state.

A Cyprus settlement will benefit Cypriots from one end of the island to another, economically, politically and culturally.  A Cyprus settlement would make a vital contribution to regional peace and stability at this crucial time.  It would free all Cypriots to realize their full potential as a unified country entering the European Union (EU).  It would also strengthen the encouraging rapprochement between Greece and Turkey, and could make a significant contribution in advancing Turkey’s candidacy for EU membership.

After a settlement, Turkish Cypriots will be able to take advantage of the wider economic possibilities of normal international commerce, foreign investment and EU assistance.  I know you -- as businessmen and women -- value these opportunities highly.  A settlement providing political and economic security would be a catalyst for prosperity.  If both sides choose to take advantage of this opportunity, Cyprus’ full economic potential can and will be realized.

My EU colleagues are better placed to give you the full picture of what a unified Cyprus joining the EU will mean in practice.  However, let me touch briefly on how joining the EU can help new member states.  Let’s look at Portugal’s experience since it became a member fourteen years ago in 1988.  I select Portugal for this comparison because it has a relatively small economy, and is a relative newcomer to EU membership.

• Portugal has significantly raised its standard of living.  GDP per capita on a purchasing power parity basis rose from 51% of the EU average in 1985, to 78% in early 2002. 

• The Portuguese economy has grown during this period, driven by investment and domestic consumption. 

• Membership in the EU has also expanded Portugal’s markets and deepened its trade relations, especially with Europe.

Underpinning these impressive achievements were EU financial subsidies and investment funds.  The EU underwrote much of the necessary cost of the needed infrastructure improvements. Starting in 1987, Brussels provided financial subsidies worth a total of $2.5 billion a year for four years. This sum was equivalent to 2% to 3% of GDP every 12 months.  In EU Regional Development Funds alone, Portugal received an estimated total of $16.5 billion U.S. dollars between 1994 and 1999.

Now, you might say, well, Cyprus is not Portugal.  It’s different, and you can’t project EU treatment of Cyprus and future trends here based on Portugal’s experience.  I agree.  No one has a crystal ball that can predict with 100% accuracy, much less guarantee, how quickly a settlement and EU accession will improve the lives of Cypriots or how fast the economy will grow after accession.   But the fact of the matter is that historically EU accession for Portugal and for other countries has had an overall beneficial impact on new members.  That is certainly what motivated the Central and East European countries – as well as Turkey -- to knock so hard on Europe’s door. 

And consider this:  although there are uncertainties over the size of the benefits which will result from a settlement, how much certainty is there, absent a settlement, that present economic circumstances will improve in any significant way? What is on the horizon that provides assurances that current obstacles will be overcome?   At the end of the day, it is all about trusting in one’s realistic expectations rather than surrendering to one’s worst fears.

In my view, a good case can be made for businessmen and women to assess post-settlement, economic prospects positively. I foresee the following benefits linked to achieving a political settlement:

• First, expanded sectoral activities, especially in tourism, construction and finance.  Non-traditional activities, such as information technology and tertiary educational services, could also play a greater role in Cyprus’ economic future.  Cyprus’ role in the regional economic activity of the eastern Mediterranean is also likely to grow.  It would be uniquely placed to marry its access to the EU and adherence to EU policies with its connections to and knowledge of Middle Eastern markets.

• Second, we are likely to see accelerated economic growth, particularly in the Turkish-Cypriot community.  The extent of the increase will depend on levels of investment, labor productivity, and demand.

• Third, we are likely to see increased employment and improved quality of job opportunities.  With a settlement, for example, the distortions and pressures created by the present economic isolation of the Turkish Cypriot private sector would disappear.

The projected benefits only increase when you consider that a Cyprus solution by the 28th of February would allow the island to sign the EU accession treaty as a unified entity.  Joining the EU will open up a whole new world to Cypriots -- and a whole new market to all of you.  EU membership offers very significant, long-term, economic benefits through participation in the integrated European market - with its 370 million consumers - for goods, services, and investment flows.  

EU membership would also mean access to some very substantial capital resources, especially for the Turkish Cypriots, in the form of pre-accession assistance, risk capital financing from the European Investment Bank, and financial aid, particularly in the form of capital grants from the EU’s Regional Development Fund.  As some of you may know, this facility aims to raise living standards in less affluent regions within the EU up to 75 percent of the EU average.   Remember the example of Portugal I mentioned earlier.

We also recognize that a settlement entails costs as well as benefits and that the international community must help address such costs.  Some, for example, have expressed concern over those displaced as a result of a settlement, those who will have to reestablish their homes and livelihood in a new location.  We are undertaking, both within the American government and in concert with others, especially our European partners, an effort to make sure that when there is a settlement, the international community will do its part.  

The EU announced on January 23 its intention to host a conference of international donors to help the two parts of the island overcome the economic effects of decades of division.  The United States is prepared to participate in that conference and to contribute financially. We also stand ready to support a "needs assessment" effort in Cyprus as the first step in preparing for a donors' conference.

At the end of the day, however, a settlement is about much more than just economics.  It is about security.  It is about Greek Cypriots and Turkish Cypriots sharing this island in peace.   It is about never returning to the dark periods of the past.  The U.S. does not want to see the clock rolled back to the way things were before 1974.  We want Cyprus to move forward, to join a Europe that is whole, free and at peace and for all Cypriots to realize their full potential.  We support a just, peaceful and durable settlement for all Cypriots, one that secures the future of their families and generations to come.   The UN settlement plan provides the basis to negotiate such a future in the weeks ahead.  The U.S. will continue to play an active role in helping Cypriots reach for peace.  The time is now.

Thank you very much.