Identifier
Created
Classification
Origin
06MOSCOW5104
2006-05-15 09:33:00
CONFIDENTIAL
Embassy Moscow
Cable title:  

RUSSIA-GEORGIA: BORJOMI MINERAL WATER BAN

Tags:  PREL ETRD GG RS 
pdf how-to read a cable
VZCZCXRO4361
PP RUEHDBU
DE RUEHMO #5104/01 1350933
ZNY CCCCC ZZH
P 150933Z MAY 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 5777
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEHC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUEHC/DEPT OF COMMERCE WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 005104 

SIPDIS

SIPDIS

STATE PASS TO COMMERCE AND AGRICULTURE

STATE PASS USTR, PASS USDA FOR FAS/ITP/BOB MACKE,ALISON
THOMAS



E.O. 12958: DECL: 05/15/2016
TAGS: PREL ETRD GG RS
SUBJECT: RUSSIA-GEORGIA: BORJOMI MINERAL WATER BAN

REF: TBILISI 1131 AND PREV.

Classified By: Minister-Counselor for Political Affairs Kirk Augustine.
Reason 1.4 (b, d)

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 005104

SIPDIS

SIPDIS

STATE PASS TO COMMERCE AND AGRICULTURE

STATE PASS USTR, PASS USDA FOR FAS/ITP/BOB MACKE,ALISON
THOMAS



E.O. 12958: DECL: 05/15/2016
TAGS: PREL ETRD GG RS
SUBJECT: RUSSIA-GEORGIA: BORJOMI MINERAL WATER BAN

REF: TBILISI 1131 AND PREV.

Classified By: Minister-Counselor for Political Affairs Kirk Augustine.
Reason 1.4 (b, d)


1. (C) Summary: Jacques Fleury, Managing Director of
Georgian Glass and Mineral Waters (GGMW),producer of Borjomi
water, outlined for us May 12 the company's recent troubles
with the Russian government. A press campaign had turned
into threats by the GOR to ban import of the water; the ban
was announced one day after Georgian DefMin Okruashvili made
provocative statements about Russia. Fleury did not believe
that the identity of the firm's beneficial owner -- oligarch
Badri Patarkatsishvili -- was a factor in Russian or Georgian
government thinking on the issue. But Fleury had been warned
by a GOR official that the problems could be resolved only at
senior political levels -- and that GGMW should not make a
public fuss about the ban until after the G-8 summit in July.
End Summary.

History of a Ban
--------------


2. (C) Fleury first detailed a strange case of poisoning that
occurred in Moscow 18 months ago. Caustic soda was inserted
in a bottle of Borjomi and served in an expensive restaurant,
causing severe internal burns. Fleury said this method had
been used in three attacks on Nestle in France several years
ago. He said the sabotage against both Borjomi and Nestle
was highly sophisticated.


3. (C) Fleury said that earlier poisoning was mentioned when
the TV publicity campaign against Borjomi began April 7. The
publicity charged that 50 percent of the Borjomi on the
Russian market was counterfeit. Fleury said this was not
true. He explained that after years of collaboration with
RosPotrebNadzor (RPN),the Russian phyto-sanitary agency,
counterfeiting of Borjomi has been reduced to between 0.5 and
one percent of the Borjomi on the Russian market. All of the
counterfeit water is produced by one source in Mari-el
district. GGMW has been unable to stop this trade, as the
manufacture is under the protection of the Mari-el local
authorities and sold in kiosks. One hundred percent of the

Borjomi actually imported into Russia is genuine, Fleury
said, and GGMW has been able to prove this by comparing
export figures with Russian customs import figures.


4. (C) Fleury said that RPN had then begun raids on
warehouses of Borjomi distributors, and had confiscated
thousands of bottles each time. Fleury said GGMW officials
and lawyers had been able to be present at some of these
raids, had taken parallel samples, and sent them to the same
official Russian laboratory that was to analyze the bottles
confiscated by RPN. The laboratory cleared GGMW's samples,
and informally told GGMW that RPN had not actually sent the
samples to the lab before announcing that they violated
Russian norms. Fleury said that RPN had not responded to
repeated requests for the results of the RPN analyses.


5. (C) On April 24 RPN Chief Medical Officer Onishchenko
announced that Borjomi was a good company and in all
probability no action would be taken against its water. On
April 25, in Kiev, Georgian DefMin Okruashvili announced that
even "fecal matter" would sell on the Russian market. On
April 26, Fleury said, Russian TV showed a news item in which
fecal matter was discovered in Borjomi bottles, and
Onishchenko announced that import of Borjomi would be banned.
One hour after Georgian President Saakashvili's statement at
the Vilnius Summit, all Borjomi was ordered off Russian store
shelves.

Contacts with RosPotrebNadzor -- and an Unknown Factor
-------------- --------------


6. (C) Fleury said GGMW's long-term objective is to re-enter
the Russian market, but in the meantime it has 25 million
bottles worth USD 15 million sitting in warehouses in Russia.
It wants to re-export them to sell in Ukraine and
Kazakhstan, but is afraid that the GOR might then charge GGMW
with the crime of trying to export a "dangerous substance."


7. (C) Fleury said he tried to address these issues in a May
11 meeting at RPN. Two of the RPN participants were
technicians known to GGMW, but the third, who ran the
meeting, was never introduced to them, and appeared not to be
from RPN at all. This official said that GGMW was following
a wise course by keeping a low public profile on the issue

MOSCOW 00005104 002 OF 003


(he contrasted this with a high-profile Georgian wine
manufacturer who has threatened to bring Onishchenko to
trial). The man implied that if GGMW stuck to this course,
the GOR would revisit the issue after "mid-July" (Comment:
i.e., after the G-8 Summit. End comment). The official said
that nothing could change before then, though he said the GOR
would look at the GGMW request to re-export its stocks from
Russia. Meanwhile, the official warned that nothing could be
resolved at the level of GGMW and RPN, only at much higher
levels.

High-Profile Partners
--------------


8. (C) Fleury dismissed the possibility that GGMW's troubles
with Russia might have something to do with GGMW's owners.
He explained that the majority stake has been held since 2003
by New World Investments, a UK holding company whose
beneficial owners were originally exiled oligarch Boris
Berezovskiy and his partner Badri Patarkatsishvili, whose
residence in his native Georgia provides refuge from his
wanted status in Russia. Fleury explained that the two had a
falling out, and Patarkatsishvili is now sole owner of the
holding company. (The initial owners of GGMW, TBC Bank
(Mamuka Khazaradze and Badri Japaridze),retain an 8 percent
share in GGMW, and the management, including Fleury, own an
unspecified small percentage as well.)

Financial Losses -- Georgian and Turkish
--------------


9. (C) Fleury said that the loss of the Russian market would
reduce GGMW's annual sales from USD 240 million to USD 85
million. The major market that would remain is in Ukraine,
where Borjomi and two Ukrainian factories owned by GGMW have
a 31 percent market share. An additional loss would accrue
to a joint venture with Turkey's major glassmaker, Sise-Cam,
which had just invested USD 25 million in a new GGMW factory
in Borjomi as a way of making further inroads into the
Russian market. The factory was scheduled to be inaugurated
in July, but those plans are now on hold.

Relations with the Georgian Government
--------------


10. (C) Fleury said GGMW is distancing itself from the
Georgian government as much as possible. He noted that the
GOG's statements have more often hurt than helped. Fleury
said that well-connected sources within the GOG had indicated
to GGMW that Okruashvili's provocative stance in Kiev had
been agreed in advance with President Saakashvili and MinInt
Merabishvili. Fleury noted the current animosity between
Georgia's leadership and GGMW beneficial owner
Patarkatsishvili, but did not imply that it affected the GOG
attitude in the Borjomi ban. Fleury recounted a conversation
with people "close to the Kremlin" who, he is convinced,
fully expect a war in South Ossetia that could easily be
engineered by provoking the Georgians into a foolhardy
reaction. (Note: We have heard this, too, but believe it is
speculation based on the general anti-Georgian atmosphere
rather than information from people who know what the Kremlin
is planning. Similar rumors are circulating of refugee camps
under construction in North Ossetia to house South Ossetian
refugees from a potential new outbreak of fighting. End
note.)


11. (C) Fleury said GGMW would try to get the EU to put
pressure on the Russian government to end the ban. He said
he was not seeking U.S. pressure at this point, as that might
be counterproductive. He hoped, though, that the issue could
come up for discussion at the G-8 summit. AgAtt explained
that Russian WTO membership would be an incentive against
this type of GOR action.

Comment
--------------


12. (C) Borjomi is a Russian institution. Its worldwide
label includes a fountain and summer residence built in
Likani by Mikhail Romanov for the Tsar's family in the 1890s.
During Soviet times the brand had enormous cachet, which
lasted through the springs' control by the Mkhedrioni
militias in the early 1990s when, according to Fleury, 100
percent of the Borjomi available on the Russian market was
counterfeit, made from "river water" (and probably included
no small amount of fecal matter). A Russian nationalist
politician, no friend of Georgia, spoke in the Duma about how

MOSCOW 00005104 003 OF 003


his aged mother would kill him if Russia banned Borjomi.
Fleury has carefully ensured that the firm's Russian branches
are staffed by Russians, and that only Russians, not
Georgians, interface on the firm's behalf between Borjomi and
the Russian authorities. That such a company should be
caught up in current Russian-Georgian polemics shows the
depth of Russian animosity towards Georgia.
BURNS