Following the United Nations Security Council Resolution 1250 of 29 June 1999, which requested the Secretary-General to invite the two leaders of the communities on Cyprus to negotiations, Alvaro de Soto was appointed as Special Advisor to the Secretary-General on Cyprus (1 November), the Secretary-General visited Turkey and U.S. President Bill Clinton visited Turkey and Greece (November), and proximity talks in New York were arranged beginning 3 December. The motivation for this renewed attempt at a Cyprus settlement was Cyprus' impending membership of the EU, and the fear that this development would create an obstacle to Turkey's hopes of joining. This prospect was of particular concern not only to Turkey, but also to the USA and the UK, which were both keen to promote Turkey's membership of the EU. A further concern was the future of the British military bases and installations on Cyprus which were regarded as essential by both the UK and USA.
On 10–11 December the Helsinki EU summit's conclusions welcomed the launch of the talks in New York and declared that "a political settlement will facilitate the accession of Cyprus to the European Union." This was followed by the observation that "If no settlement has been reached by the completion of accession negotiations, the Council's decision on accession will be made without the above being a precondition." However the EU kept its options open by adding: “In this the Council will take account of all relevant factors.”
Following the talks in New York, four more rounds of proximity talks were held in Geneva: 31 January – 8 February 24 July – 4 August, 12–26 September, and 1–10 November 2000. On 24 November, in response to the Secretary General's assessment of the talks (8 November 2000), which the leader of the Turkish Cypriots Rauf Denktaş rejected, Denktaş announced his withdrawal from the talks "because no progress could be made until two separate states are recognized". He was supported in his decision by Turkey.
After almost a year of no talks and therefore little progress, Alvaro de Soto announced on 5 September 2001 that "on behalf of the Secretary-General I have conveyed to his Excellency The Greek Cypriot Leader Mr. Glafcos Clerides and his Excellency Mr. Rauf Denktaş, the Turkish Cypriot leader, an invitation to resume the search for a comprehensive settlement to the Cyprus problem under the Secretary-General's auspices... with separate meetings of the Secretary-General with each of the two leaders on 12 September 2001 in New York." Denktaş rejected Annan's invitation on the same day, but the visit to Cyprus in October 2001 of the President of the European Commission Romano Prodi prompted him to think again. During his visit Prodi stated that Cyprus would become an EU member with or without a settlement. Shortly thereafter Denktaş entered into correspondence with Clerides, and a meeting in the presence of Alvaro de Soto was organised in Nicosia on 4 December 2001. After the meeting, de Soto announced that the two leaders had agreed the following:
The new round of talks was held in Nicosia and ran from 16 January. In September the venue was moved to Paris, and then, in October, meetings were held in New York. After the New York meetings Alvaro de Soto, read a message from the Secretary-General to the effect that "a comprehensive settlement has to be a complex, integrated, legally binding and self-executing agreement, where the rights and obligations of all concerned are clear, unambiguous, and not subject to further negotiations."
On 11 November 2002, Alvaro de Soto presented a comprehensive plan for the resolution of the Cyprus issue (Annan Plan I). Following feedback, but no negotiations between the two sides, a revised version was published on 10 December (Annan Plan II), two days before the EU Copenhagen summit. In his report to the Security Council of 1 April 2003, Kofi Annan reveals that the Copenhagen European Council Summit of 12 and 13 December 2002 was seen as a deadline:
My Special Adviser helped to guide the discussions and by mid-2002 he was making concrete suggestions to assist the parties to build bridges. I refrained however from making a written substantive input until 11 November 2002, when, no breakthrough having been achieved, and believing that no other course of action remained open if the opportunity was to be seized, I put forward a document which I believed constituted a sound basis for agreement on a comprehensive settlement. Following intensive consultations, I put forward a revised proposal on 10 December 2002, hoping to assist the parties to reach agreement in time for the Copenhagen European Council on 12 and 13 December 2002.
According to Claire Palley, the revisions to Annan Plan I "were not even-handed".
"... seen overall, the changes to Annan I, made before the Copenhagen summit, began to tilt the balance further than the existing 'compromises' in the 'bridging proposals' even though, for the sake of 'face', some relatively minor changes were made in response to Greek-Cypriot representations."
Intense pressure was exerted on both sides to agree to Annan Plan II before the Copenhagen Summit decision regarding Cyprus' membership application but to no avail. Nevertheless, the summit confirmed that all of Cyprus would become a member on 1 May 2004, but "in the absence of a settlement, the application of the acquis to the northern part of the island shall be suspended".
Cyprus will be admitted as a new Member State to the European Union. Nevertheless, the European Council confirms its strong preference for accession to the European Union by a united Cyprus. In this context it welcomes the commitment of the Greek Cypriots and the Turkish Cypriots to continue to negotiate with the objective of concluding a comprehensive settlement of the Cyprus problem by 28 February 2003 on the basis of the UNSG's proposals. The European Council believes that those proposals offer a unique opportunity to reach a settlement in the coming weeks and urges the leaders of the Greek Cypriot and Turkish Cypriot communities to seize this opportunity....
The European Council has decided that, in the absence of a settlement, the application of the acquis to the northern part of the island shall be suspended, until the Council decides unanimously otherwise, on the basis of a proposal by the Commission. Meanwhile, the Council invites the Commission, in consultation with the government of Cyprus, to consider ways of promoting economic development of the northern part of Cyprus and bringing it closer to the Union.
At the same time Turkey was told that a decision on a start date for accession negotiations would be delayed until after Cyprus had joined.
If the European Council in December 2004, on the basis of a report and a recommendation from the Commission, decides that Turkey fulfils the Copenhagen political criteria, the European Union will open accession negotiations with Turkey without delay.
There now followed a hasty attempt on the part of Alvaro de Soto and his team to come up with a version of the Plan which both sides could accept before 28 February 2003, a deadline which had been set by the EU so that the whole process could be completed before Cyprus's signature of the EU accession treaty, which took place on 16 April 2003.
In his Report of 1 April 2003, Kofi Annan wrote that he believed Annan III, which was submitted to the two sides two days before the deadline, should be the final version of the plan.
During the last week in February, I visited Turkey, Greece and Cyprus, and on 26 February I formally presented a third, and what I believed should be final, version of my plan, entitled Basis for a Comprehensive Settlement of the Cyprus Problem. Prior to my visit my Special Adviser had contributed to writing the important changes I had in mind. This version contained further refinements, particularly addressing the basic requirements of the Turkish side at the same time as meeting a number of Greek Cypriot concerns in order to maintain the overall balance. I also filled in all remaining gaps in the core parts of the plan, particularly those relating to security on which Greece and Turkey had not been able to agree.
According to Claire Palley, the UN team had "again made changes meeting Turkish concerns", and she cites the phrase "particularly addressing the basic requirements of the Turkish side" from the paragraph above as confirmation.
Having presented the "final" version of the Plan, Kofi Annan invited the Greek and Turkish Cypriot leaders to The Hague on 10 March, where they were to inform him whether they were prepared "to sign a commitment to submit the plan for approval at separate simultaneous referenda on 30 March 2003". In the meantime the Plan had been altered with the addition of extensive "Corrigenda and clarifications", and in this new form was presented to the leaders on 7 March 2003. On the Greek Cypriot side there had been a change of leadership following elections on 16 February in which Tassos Papadopoulos was elected President of the Republic of Cyprus. He received the altered Plan when he was on his way to The Hague to meet the Secretary General.
On 10 March 2003 in The Hague, Netherlands, the UN effort collapsed when Denktaş told the Secretary-General he would not put the Annan Plan to referendum. According to the BBC, "ultimately it was the Turkish Cypriot side which refused to even talk further, and which was blamed for the failure of the peace process." In the same news article Denktaş is quoted as saying: "The plan was unacceptable for us. This was not a plan we would ask our people to vote for."
In his report, Kofi Annan saw this as the end of the road:
On 11 March, at 0530 hours and following negotiations with the two leaders and the guarantor Powers lasting more than 19 hours, I announced that there had been no such agreement, and at that point the process which had begun in December 1999 reached the end of the road. The office in Cyprus of my Special Adviser, which opened in advance of the direct talks, is to close during April.
As 2003 came to a close and the date for Cyprus's accession to the EU approached, a flurry of diplomatic activity got under way to revive the negotiations. US State Department Special Cyprus Coordinator Thomas Weston met with Foreign Minister George Papandreou in Washington on 17 September 2003 and told him the USA wanted "an immediate restart of talks by the two sides on the island".
At the meeting of the European Council in Brussels on 12 December 2003, the Council reiterated its preference "for a reunited Cyprus to join the Union on 1 May 2004" and urged "all parties concerned, and in particular Turkey and the Turkish Cypriot leadership, to strongly support the UN Secretary General's efforts" in an "immediate resumption of the talks on the basis of his proposals".
In December Thomas Weston visited Greece, Cyprus, and Turkey; and the US President George Bush wrote to the Greek Prime Minister Costas Simitis on 26 December urging him to push for a Cyprus settlement: “We now have a window of opportunity to reach a settlement so that a united Cyprus joins the European Union. We must not let that window close.”
Simitis responded by praising the Greek Cypriot side and pointing out that "time is running out due to the Turkish side's unwillingness to cooperate".
In the meantime parliamentary elections in Northern Cyprus (14 December 2003) had changed the political landscape. Mehmet Ali Talat leading a coalition of pro-Annan-Plan parties had narrowly defeated the incumbent Prime Minister Derviş Eroğlu. Elections had recently brought about a change of leadership in Turkey too, and Recep Tayyip Erdoğan had become prime minister on 14 March 2003. Erdoğan, keen to make progress on the issue of EU membership for Turkey, was "not in favor of following the Cyprus policy that has been followed for the last 30 or 40 years." He criticised Denktaş, saying, "This is not Mr. Denktaş's personal business," and adding that Denktaş "should pay more attention to what Turkish Cypriots think and the growing protest against his rule". However analysts have suggested that he and Denktaş were not so far apart in what they wanted from a settlement—they merely disagreed on tactics, with Erdoğan preferring that: "Neither Turkey nor Turkish Cyprus should give an uncompromising impression. We should not be the side keeping away from the negotiating table."
Following intervention by Erdoğan, the outcome of post-election manoeuvring in Northern Cyprus was that Talat formed a government in alliance with the Democratic Party led by Rauf Denktaş's son Serdar Denktaş. However Rauf Denktaş remained President, since the President is elected at separate elections.
On 4 February 2004, after having discussed matters with President Bush, Kofi Annan sent a letter to both sides in which he invited them to New York on 10 February 2004. In his letter, Annan proposed that talks resume with the aim of finalizing the plan by 31 March, and holding the referendum on 21 April. He also reserved for himself the task of completing the text of the plan if necessary:
“It is clearly desirable that the text should emerge completed from the negotiations... However, should that not happen, I would, by 31 March, make any indispensable suggestions to complete the text. Naturally I would only do this with the greatest of reluctance...”
At New York pressure was exerted on the two sides to grant the Secretary General the powers of an arbitrator or mediator, but the Greek-Cypriot side would not agree. The Security Council had asked the Secretary General to facilitate negotiations within the framework of his "good offices", and any extension to that mandate should have been sought from the Security Council, where, however, any one of its members could have used a veto to deny the request.
After intense negotiations the procedure outlined in Annan's letter was organised into phases. In Phase 1 the Cypriot parties would negotiate "within the framework of my [Annan's] mission of good offices" in Nicosia from 19 February in order to produce a final text by 22 March. Negotiations were to be restricted to matters that fell "within the parameters of the Plan".
In the absence of agreement, Phase 2 would involve the Secretary General convening a meeting of the two sides, "with the participation of Greece and Turkey in order to lend their collaboration, in a concentrated effort to agree on a finalized text by 29 March.”
In Phase 3 the Secretary General would use his "discretion to finalize the text to be submitted to referenda on the basis of my plan".
The procedure enlarged the role foreseen for me, from completing any unfinished parts of the plan (filling in the blanks) to resolving any continuing and persistent deadlocks in the negotiations...
When Phase 1 got under way, the two Cypriot leaders, Rauf Denktaş and Tassos Papadopoulos, met nearly every day for negotiations facilitated by Alvaro de Soto. In addition, numerous technical committees and subcommittees met in parallel to work on the details. In his report the UNSG noted that Phase 1 of the effort “did not produce significant progress at the political level. However, positive results were achieved at the technical level by experts from the two sides assisted by United Nations experts.”
According to Claire Palley, problems and delays were created in this phase by Denktaş's insistence on "producing proposals well beyond the Plan's parameters". For example, the Turkish side "demanded massive EU derogations", and "insisted on a right for all Turkish settlers to remain". James Ker-Lindsay notes that: “The situation was also hindered by the bad atmosphere generated by Rauf Denktaş, who appeared determined to scupper the process by holding frequent press conferences at which he revealed as much as he could to the media.”
In addition Denktaş caused a "mini-crisis" (so described in Annan's Report) by declaring that he would not be attending the Phase 2 talks. In fact it was a major crisis. Technically the Phase 2 talks could not take place without the Turkish Cypriot leader there to negotiate with the Greek Cypriot leader, and Tassos Papadopoulos would have been within his rights to refuse to participate in the absence of the leader of the Turkish Cypriots. As it was he merely "stressed the need for a credible interlocutor who would represent the Turkish Cypriot side" and pointed out at the last Phase 1 meeting that no progress had been achieved on substantial issues.
Phase 2 was scheduled to take place in Bürgenstock on 24 March 2004. After consultation with the Turkish government, Denktaş agreed to confer full negotiating authority on Talat the Prime Minister, and his son Serdar Denktaş, the Foreign Minister. According to Claire Palley, the Greek Cypriot side was pressured by "the UN and various Powers" to treat Talat and Serdar Denktaş as leaders, but in reality Rauf Denktaş remained leader of the Turkish Cypriots "able at any time to withdraw his negotiating authority or to veto decisions."
At Bürgenstock, the Turkish side wanted quadrilateral meetings (the two Cypriot delegations plus Greece and Turkey), but the Greek Cypriots objected that this had been discussed and rejected at the New York meetings. The role of the Greek and Turkish representatives was not supposed to include participating directly in the negotiations.
The first meeting for negotiations between the Cypriot sides was arranged for 24 March, but it was cancelled by de Soto at the request of Talat, two hours before it was to take place. No further formal meetings were arranged. Instead de Soto tried to get Tassos Papadopoulos to give him a prioritised wish list. The Greek Cypriots feared that if they gave such a list it would be used to justify "trade-offs" and thus allow for drastic changes to the plan in Phase 3 outside of already agreed parameters.
On 25 March de Soto tried to get the Cypriot parties to sign a commitment document, but it was pointed out to him that this was not part of the agreed procedure.
On 26 March Ambassador Uğur Ziyal of Turkey's Foreign Ministry gave a list of "Final Points" to de Soto with the demand that the changes requested therein be made by the UN team. When the Turkish Prime Minister Erdogan arrived in Bürgenstock on 29 March, he was informed by Annan that nine of his eleven "points" had been agreed to by the UN team, and that the other two were virtually met. That this was the case became clear when Annan Plan IV was presented to the two sides on 29 March, and the Turkish side leaked Ziyal's document.
The delegations were asked by Annan to provide him with their comments on Annan IV, which contained "numerous amendments, including changes on core issues and reopening substantial trade-offs, previously agreed" within less than 24 hours so that he could finalise the Plan. The final plan, Annan Plan V, was tabled on 31 March. It met all of Turkey's demands. In presenting it Kofi Annan said:
Let me be clear. The choice is not between this settlement plan and some other magical or mythical solution. In reality, at this stage, the choice is between this settlement and no settlement.... This plan is fair. It is designed to work. And I believe it provides Cypriots with a secure framework for a common future. At the end of the day, of course, it does not matter what I think. It is what the people think that counts. They decide—and rightly so.
“The Security Council... respects the outcome of both referenda... shares the Secretary-General's disappointment that efforts since 1999 to reunify the island have not succeeded and regrets that an extraordinary and historic opportunity to resolve the Cyprus issue has been missed. The Security Council reiterates its strong support for an overall political settlement in Cyprus.
"I remain convinced that the plan I put forward is the only realistic basis for reunifying the island, which I believe is the sincere desire of the majority of Cypriots in both communities. I hope that before too long the Greek Cypriots will have an opportunity to consider the plan more calmly, and to judge it on its true merits."
"Together with a broad cross-section of the international community, the Secretary-General remains convinced that the settlement plan put to the two sides in today's referenda represents a fair, viable and carefully balanced compromise—one that conforms with the long-agreed parameters for a solution and with the Security Council's vision for a settlement, and meets the minimum requirements of all concerned."
A few days before the referendum, on Wednesday, 21 April 2004 The European Parliament passed a resolution on Cyprus which included the following statements:
The European Parliament
2. Expresses its support, and welcomes the initiative of the United Nations Secretary-General... 3. Acknowledges – although it would unreservedly welcome a united Cyprus as a member of the European Union – the right of Cypriots to decide for themselves on the plan in a referendum without pressure from the outside and will respect such a decision, but points out that a broad, fact-based information campaign is still necessary; 4. Considers that this final document constitutes a historic compromise which would end one of the longest-running conflicts in Europe and could serve as a shining example for handling equally difficult international issues;5. Considers that the final revised plan institutionalises a functional federal system of government which is able to ensure that a reunited Cyprus can speak with one voice and fully play its role in the framework of the European institutions, and calls on all parties to fulfil their obligations with honesty and openness;
Following the referendum the European Commission issued the following statement to the press:
The European Commission deeply regrets that the Greek Cypriot community did not approve the comprehensive settlement of the Cyprus problem, but it respects the democratic decision of the people. A unique opportunity to bring about a solution to the long-lasting Cyprus issue has been missed. The European Commission would like to warmly congratulate Turkish Cypriots for their "Yes" vote. This signals a clear desire of the community to resolve the island's problem. The Commission is ready to consider ways of further promoting economic development of the northern part of Cyprus...
"We must now act to end the isolation of northern Cyprus. That means lifting the sanctions on trade and travel. That means also ensuring that EU funds currently available for dispersal are actually dispersed."
"The UK Government believes steps should be taken as quickly as possible to end the isolation of the Turkish Cypriots."
"The Turkish Cypriots can reasonably ask that they should not be the victims of this setback; and yet it is they who are left in limbo outside the European Union. But what is now needed, surely, is to remove all discrimination against people who are, after all, citizens of the European Union and to prepare the Turkish Cypriots and their legislation and administrative practices for eventual European membership."
"I believe that it was a great shame that the Greek Cypriots voted no, and that it was a mistake to reject the Annan plan. We strongly believe that the Turkish Cypriots, who voted for a peaceful resolution of the Cyprus problem, should not be penalised because the Greek Cypriots rejected the UN settlement plans. Turkish Cypriots demonstrated their desire to be in the EU, as part of a united island.... The clear majority vote by the Turkish Cypriot community at the referendum on 24 April to accept the UN Secretary General's plan for a settlement of the Cyprus problem has not gone unnoticed. The Government of UK believes steps should be taken as quickly as possible to end the isolation of the Turkish Cypriots."
"We have certainly been looking at steps to ease the isolation of the Turkish Cypriot side. Our ambassador in Cyprus last week announced a step with regard to extending the validity of visas for Turkish Cypriots that makes it easier for them to travel, particularly for the students who might come to the United States. So that's one thing that we've announced already. We'll be looking at other steps that we can take and making those known at the appropriate time."
"We are disappointed that a majority of Greek Cypriots voted against the settlement plan. Failure of the referenda in the Greek Cypriot community is a setback to the hopes of those on the island who voted for the settlement and to the international community."
"We think that a Greek Cypriot vote against the settlement means that a unique and historic opportunity was lost. We believe the settlement was fair. It has been accepted by the Turkish Cypriot side. There will not be a better settlement. There is no other deal. There is no better deal available. And we hope that the Greek Cypriots will come to comprehend this in due time.
We have nothing but praise for the courageous Turkish Cypriots who voted for this settlement.... There's not a new negotiation plan, there's not a renegotiation plan. This is the deal.
We do think that there was a lot of manipulation by the Greek Cypriot leaders in the run-up to the election; that the outcome was regrettable but not surprising, given those actions. I think the Europeans as well have made clear --statements by External Relations Commissioner Chris Patten, European Parliamentary President Pat Cox, Enlargement Commissioner Verheugen—that they have strong concerns in that regard as well."
"Pretending that a plan better conceived, more functional, or otherwise more favourable to the Greek Cypriot position could be offered any time soon is quite misleading. Protestations to that effect have only the generic purpose of leaving room for hope and goodwill that could come to fruition under favourably evolving circumstances. The future of peaceful accommodation in the region depends on constructive relations between Turkey and the European Union and on continued prudence in the bilateral relations between Greece and Turkey". 
Germany "The German Government regrets that a "yes" vote was only achieved in the northern part of the island in today's referenda in Cyprus. It is disappointing that the citizens in the south of the island did not seize the great opportunity for reunification which the Annan Plan offered. Unfortunately, a reunited Cyprus will not now be joining the European Union on 1 May."
France "France hopes that the Commission, in accordance with the conclusions of the Copenhagen European Council of December 2002, proposes that proper measures be taken to promote the economic development of the northern part of the island and bring it closer to the Union."
Bangladesh "Bangladesh expresses its deep disappointment at the rejection of the UN Plan for the reunification of Cyprus, by one community in Cyprus.... Bangladesh believes that those who voted for the UN plan in Cyprus should now be given the opportunity to restore immediately their economic and trade activities internationally without any restriction."
Czech Republic "On 1st May 2004, Cyprus will become EU member. The Turkish inhabitants of Cyprus have expressed in the referendum their will for the unification of Cyprus. They should not become hostages of the situation they will face after 1st May resulting from the refusal of the Annan plan in the south part of the island. The Czech MFA believes that the EU and the international community will find a way to help the north part of Cyprus to overcome economic and social consequences of the decades of international isolation."
Sweden "We appreciate the initiative of Prime Minister Erdoğan and of the Turkish Government in order to re-unite Cyprus. Now, the EU must evaluate how it can contribute and facilitate the trade in the island and the border crossings between the two parts."
Austria "The Austrian Foreign Minister Benita Ferrero-Waldner expressed her regret at the negative outcome of the referendum on the Greek side of Cyprus.
The fact that the referendum resulted in a positive vote on the Turkish side of Cyprus should be appropriately honored by the international community."
Organisation of the Islamic Conference "It is our duty to put an end to the isolation of Turkish Cypriots."
"What happened in Cyprus with the Annan plan in reality has nothing to do with the Turkish Cypriots, but the main issue was Turkey's accession into the European Union and the pseudo-state was used as pawn."
"If the Greek-Cypriots say 'no' to the Annan plan, we will take them to a new referendum, until they say yes."