FACED with the scenario of loosing at least half of the 259 million euros in aid for the Turkish Cypriots if an EU financial regulation for the north is not approved by the end of this month, London is stepping up its effort to clinch a deal.

The issue is said to have been at the centre of the meetings held in Nicosia yesterday by Dominique Chilcott, in charge of the Cyprus desk at the Foreign Office.

However, London, Nicosia and Brussels have not been forthcoming on this issue, mainly because the state of play is only expected to become clearer during the meeting between President Papadopoulos and British Premier and EU President Tony Blair in the UK next week.

What appears to be the effort today is how to decouple the financial aid regulation from the one on direct trade, which Nicosia rejects.

The Cyprus government appears willing to discuss trade only based on elements of its proposal on the Varohsa port, as was discussed in the ‘secret talks’ held under the Luxembourg Presidency last month.

It is also expected to use the position held by the Turkish Cypriot Chamber of Commerce that direct trade would not bring substantive economic benefits, which is why it suggests “free trade”.

EU sources told the Mail the Chamber may be correct in relation to the trade of goods produced in the north, but noted that the Turkish Cypriots wanted to use Cyprus as a “transit” and be able to export goods from “third countries”, in other words Turkey.

The sources said what was important was that the aid regulation went ahead, and the second regulation was not “buried”.

However, in this discussion it is not only the Cyprus government which is a determining factor but also Mehmet Ali Talat.

If the Turkish Cypriot leader accepts the decoupling of the two proposals and some formula is found on the wording of what will happen to the direct trade regulation, then it is possible for an agreement to be reached.
At this point, though, intentions are not at all clear, one source said.