SUCCESSFUL LAUNCH OF SOUTH OSSETIA ECONOMIC

C O N F I D E N T I A L SECTION 01 OF 02 TBILISI 002708

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DEPT FOR EUR DAS BRYZA AND EUR/CARC

E.O. 12958: DECL: 10/10/2016
TAGS: PREL PGOV EAID GG
SUBJECT: SUCCESSFUL LAUNCH OF SOUTH OSSETIA ECONOMIC
REHABILITATION PROGRAM


Classified By: Ambassador John F. Tefft for reasons 1.4(b) & (d).

Summary
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1. (C) International donors, OSCE, Georgia, and South Ossetia
kicked off the new economic rehabilitation initiative for
South Ossetia with the first steering committee meeting in
Tskhinvali October 6, much of which was open to Georgian and

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South Ossetian media. DCM signed a memorandum with OSCE to
make available USD 2 million of USG funding to support
implementation this year. Georgia reiterated its pledge to
match the total contribution of all other donors, and
suggested joint police patrols as a step to build trust
between the sides. The South Ossetians, despite some
political comments aimed at the Georgians, expressed strong
support for the economic program and a willingness to work
with the Georgians and other donors. This event was a
positive change in the climate of increasing tensions between
the sides, and many of the participants are now aiming to
continue the dialogue at the Joint Control Commission (JCC)
meeting scheduled for Vladikavkaz October 13-14. End Summary.

Helping the People
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2. (U) Representatives of a broad range of donors traveled to
Tskhinvali for the event, filling the JCC conference room to

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capacity. OSCE Acting Head of Mission Veselin Nikolaev
stressed that donor support was aimed at helping the people
in the region; he called for Georgian, South Ossetian, and
international experts to work as a team, and stressed the
importance of security and freedom of movement. Frank
Geerkins of the Belgian MFA stressed the support of the OSCE
Chairmanship for the program. Speaking for the USG, DCM said
our assistance aims to support just and democratic
governance, at national and region levels, to encourage and
assist leaders to invest in the needs of the people, and to
expand opportunities for economic growth. Following the
meeting, DCM and Nikolaev signed a memorandum on the USG
contribution of USD 2 million to support an economic
development center. DCM stressed that further USG support
would depend in large part on the commitment and progress
demonstrated by the sides to improve conditions for the
region's inhabitants and to further the peace process.

Civility Breaks Out Between the Sides
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3. (U) Both the Georgian delegation, represented by State
Minister of Conflict Resolution Merab Antadze, and the South
Ossetians, represented by JCC deputy co-chair Leonid Tibilov,
expressed strong support for the program and a willingness to
work with each other, as well as with OSCE and other donors.
Antadze stressed that next year's Georgian budget will
include a sum for the program equal to the amount contributed
by all the other donors combined, expected to be USD 10
million. Ruslan Abashidze, Antadze's deputy, called for the
revival of an old practice of joint Georgian-South Ossetian
police patrols in the region. Tibilov reacted positively to
the police idea, and suggested further discussions, including
perhaps at the JCC in Vladikavkaz. Tibilov took a generally
supportive, cooperative tone during the meeting, although he
did veer off onto pointed political comments on occasion, for
example blaming Georgia for a deadly September shootout in
the conflict zone. The Georgians refused to be drawn in,
arguing that the steering committee meeting was not the right
format for such exchanges. The Russians, whose Embassy in
Tbilisi remains drawn down, were represented at the meeting
by Murat Tkhvostov, North Ossetian JCC co-chair, who stressed
that economic success will strengthen work in the political
sphere.

Comment
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4. (C) The most significant fact about this meeting was that
it took place at all, given the deteriorating relations
between the sides, including the reported October 2 statement
by South Ossetian "president" Kokoity that he was breaking
off talks with Georgia. It now appears that statement was
not meant to be taken literally. The Georgians tell us OSCE
is working to organize the JCC meeting as scheduled in
Vladikavkaz October 13-14, despite the logistical hurdles
caused by the Russian flight ban and closure of the Upper
Lars-Kazbegi land crossing. The Georgians understand that
Russia will likely allow a charter flight from Tbilisi to
Vladikavkaz and back. The Georgians and South Ossetians
appear to have found avenues to renew the dialogue, but we
will need to ensure that the positive remarks in light of a
10 million dollar donation by the international community
become real steps forward in the process of finding a
political solution, including by using the expanded format to
increase the participation of the international community in

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the political dialogue. Both sides have now committed
themselves very publicly to the economic rehabilitation
program, and we will want to use this success in
internationalizing the political process so we can move
forward toward a solution.

TEFFT