GEORGIANS ADVANCE PROPOSAL TO SOLVE WTO BORDER

C O N F I D E N T I A L SECTION 01 OF 04 TBILISI 003098

SIPDIS

SIPDIS

STATE FOR EUR/CARC AND EEB/TPP/MTA
STATE PASS USTR FOR BURKHEAD AND KLEIN

E.O. 12958: DECL: 12/14/2017
TAGS: ETRD PREL WTO USTR GG RU
SUBJECT: GEORGIANS ADVANCE PROPOSAL TO SOLVE WTO BORDER
CROSSING ISSUE WITH RUSSIA

REF: TBILISI 1386

Classified By: Ambassador John F. Tefft, reason 1.4(b) and (d).


1. (C) Summary: On December 13, Econoff met with Tamar
Kovziridze, Deputy Minister of Economic Development and
Georgia's lead negotiator on WTO issues. Kovziridze shared
the text of a proposal by the Georgian government for
solution of the impasse over border crossings that is the
basis of a disagreement with the Goverment of Russia that is
preventing completion of Georgia's bilateral agreement with
Russia for accession to the WTO. The agreement envisages a
joint Russian-Georgian presence at two border crossings in
Abkhazia and South Ossetia, with international monitoring.
Realization of such an agreement will be difficult because it
directly challenges Abkhaz and South Ossetian claims to
sovereignty and Russia's ambiguous policy toward the
breakaway regions. End Summary.


2. (C) In July 2006, the Government of Georgia reopened
negotiations with the Government of Russia on their 2004
bilateral agreement for WTO accession. Border crossings into
Russia in the breakaway regions of Abkhazia and South Ossetia
are operating without Georgian permission and Georgia
contends their operation violates a Russian promise to
regularize the border crossing's status in the bilateral
agreement. WTO procedures require that all bilateral
agreements be concluded before the accession process can move
on to multilateral negotiations and finalization of the
accession. Although the Russian negotiator, Max Medvedkov,
has made statements suggesting that Russia can begin the
multilateral negotiations even if the bilateral agreement
with Georgia is outstanding, the GOG will oppose any such
move. Russia has heretofore claimed that the border
crossings issue is a political, not a WTO issue. The issue
is a sensitive one that will not be easy to solve, because it
directly touches on Georgia's ability to assert sovereign
control over areas that are as a practical matter under the
control of the de facto governments in Sokhumi and
Tskhinvali.

SIPDIS


3. (C) Kovziridze met with Medvedkov and Russian delegation
in Geneva on November 22, continuing negotiations that began
in January 2007. She told Econoff that the WTO secretariat
has supported the GOG in its conviction that the border
crossing issue is a WTO matter, and the GOR has begun to
concede the point, at least privately. The latest
negotiations began to focus on how to solve the problem.
Georgia presented the Russian delegation with a document
outlining basic principles and mechanisms for legalization of
the border crossings (Roki-Lower Zaramag and Gantiadi-Adler).
The GOG is now waiting for a Russian response and expects to
hold further discussions in January 2008.


4. (C) Georgia is not the only country with which Russia is
negotiating on a bilateral basis. Saudi Arabia recently
opened discussions with the Russians after determining that
it has issues of interest. The EU also has concerns about
Russia's adherence to promises made in its bilateral
agreement, including issues related to timber exports. At
the same time, Kovziridze said, the WTO accession working
group chair is holding informal multilateral "consultations"
to keep Russia's accession process moving forward. Normally,
according to Kovziridze, such consultations are used to
resolve procedural issues only, but the chair is working on
some substantive issues. The GOG is not happy with this, but
is participating in order to ensure that its interests are
protected.


5. (C) The text of the Georgian proposal for resolving the
border crossing issue follows at paragraph six.
Realistically, resolution of the border crossings issue
presents significant problems. The Abkhaz and South Ossetian
de facto governments are certain to reject the presence of
Georgian customs officers on what they regard as their
sovereign territory. The proposal is also a challenge to the
Russian side's ambiguous policy of official respect for
Georgia's territorial integrity and unofficial support for
the separatists.


6. (C) Begin text of Georgian proposal (please protect):

PROPOSAL OF GEORGIA TO THE RUSSIAN FEDERATION ON THE BASIC
PRINCIPLES AND MECHANISMS FOR LEGALIZATION AND WTO-CONSISTENT
ADMINISTRATION OF THE CUSTOMS CHECK-POINTS ROKI-LOWER ZARAMAG
AND GANTIADI-ADLER ON THE BORDER BETWEEN GEORGIA AND THE
RUSSIAN FEDERATION IN THE FRAMEWORK OF RUSSIA'S WTO ACCESSION
PROCESS


TBILISI 00003098 002 OF 004


November 2007
Tbilisi, Georgia

Background Information

The present paper was prepared as a follow up to the last
bilateral negotiations between Georgia and the Russian
Federation on the 19th of October 2007, Geneva, Switzerland,
WTO HQ where the sides agreed that Georgia would present a
proposal on the basic principles and mechanisms of
legalization and administration in a WTO-consistent manner of
the customs check-points, Roki-Lower Zaramag and
Gantiadi-Adler, on the border between Georgia and the Russian
Federation.

The above-mentioned meeting between the negotiating teams of
Georgia and the Russian Federation took place in the
framework of Russia's accession process to the WTO and was
coordinated by the Head of the WTO Accessions division, Mr.
Arif Hussein.

In summer 2006 Georgia reopened bilateral negotiations with
the Russian Federation in the latter's accession process to
the World Trade Organization. In this framework, Georgia's
only request towards the Russian Federation is the
legalization and proper functioning of the two illegal
customs check-points located at Gantiadi-Adler and Roki-Lower
Zaramag, on the Georgian-Russian border.

The above-mentioned check-points are listed in the Agreement
between the Government of Georgia and the Government of the
Russian Federation on Check Points across the Customs Border,
which was signed on 8 October 1993. Article 4 of this
Agreement explicitly states that the Parties will administer
the opening and closing of the check points across the
customs border based on mutual agreement. Currently,
Gantiadi-Adler and Roki-Lower Zaramag check-points are
operated by Russia without any prior agreement with Georgia.

Georgia's position vis-a-vis Russia results from the
obligation taken by the Russian Federation towards Georgia in
the bilateral protocol on the completion of negotiations on
Russia's accession to the WTO, signed in May 2004, and
Russia's general WTO obligation regarding customs
administration. In the Georgia-Russia protocol Russia
undertook to solve problems related to customs regulation and
administration related to trade in goods. However, no
progress was seen for more than two years in the resolution
of these problems and Russia has yet to comply with its
general WTO obligation on customs administration.

The existence of unregulated trade through illegally
functioning check-points - operated by the unilateral
decision of the Russian Federation - severely violates
numerous articles of WTO rules and raises serious concerns in
this respect about WTO compliance. This paper presents
Georgia's view on how to ensure legalization and proper
functioning of
the two illegal customs check-points of Gantiadi-Adler and
Roki-Lower Zaramag and is meant to serve as a basis for
discussion.

Georgia's Proposal

In the framework of Georgian-Russian bilateral negotiations
on Russia's accession to the World Trade Organization (WTO)
and with the purpose to legalize and ensure WTO-consistent
administration of customs check-points Roki-Lower Zaramag and
Gantiadi-Adler, the Georgian side proposes to establish joint
control and monitoring over the above-mentioned customs
check-points.

In addition to bilateral efforts aimed at the legalization of
trade flows through these two check-points, an appropriate
level of international involvement should be established to
ensure compliance with agreed principles. (Note:
International involvement in this document means involvement
of the European Union, OSCE or UN, or joint efforts by these
organizations.)

Steps to be taken in order to establish a joint monitoring
mechanism for check-points:

-- Submission of the official proposal of the Georgian side
to the Russian side on the establishment of the joint
monitoring mechanism on the two check-points at the
Georgian-Russian border.

-- Reaching of an agreement between the Georgian and Russian

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sides on establishing the joint monitoring mechanism.

-- Preparation of the joint request by the Governments of
Georgia and the Russian Federation and its submission to
international partners in order to ensure their support and
adequate of level participation in joint efforts.

-- Signing of a trilateral document between Georgia, the
Russian Federation and an international partner. The
document should be legally binding and will serve as a legal
basis for the joint monitoring without right of withdrawal
based on a unilateral decision.

-- The parties will exchange diplomatic Notes on the legal
functioning of Roki-Lower Zaramag and Gantiadi-Adler customs
check-points in order to create a bilateral legal basis for
the functioning of these check-points. The exchange of notes
will take place only after the signature of a trilateral
document mentioned above.

Basic principles of joint monitoring:


1. The functioning of the jointly controlled customs
check-points should be monitored by an international Joint
Monitoring Mission.


2. Customs clearance on the Georgian part of the customs
check-points will be implemented according to the Georgian
legislation.


3. Customs clearance on the Russian part of the customs
check-points will be implemented according to the legislation
of the Russian Federation.


4. The customs administrations of the Russian Federation and
Georgia should ensure that only economic agents registered in
accordance with Russian and Georgian legislation are allowed
to import goods into the respective territories. In Georgia's
case, this entails, among other things, the presentation of a
certificate of origin issued according to Georgian
legislation.


5. In case of re-export the parties will only accept customs
and shipping documents certified only with mutually
recognized stamps, seals and official signs.


6. In order to simplify customs procedures the registration
of economic agents and issuance of the certificates of origin
and other customs documents will be carried out by various
branches of respective state institutions.

Conditions to be fulfilled for successful functioning of
joint monitoring:

-- Safety, security and escort of the Joint Monitoring
Mission's personnel located on the territory of Georgia
should be guaranteed based on existing legal and security
arrangements, specificities of which can be subject to
further discussion between the parties.

-- tri-lateral commission should be created in order to
assess and evaluate the implementation of joint monitoring
and produce monthly reports. This commission should be
composed of Georgian and Russian officials and
representatives of international organizations.

-- Free movement of the Joint Monitoring Mission's personnel
should be ensured through creation of the so-called "green
corridors".

-- Infrastructure (institutional, personnel, equipment) for
preventing trafficking, money laundering, and smuggling of
radioactive and other types of goods should be established
and maintained.

-- The Government of Georgia accepts the obligation to
finance the construction of the customs facilities on its
territory.

The Mandate of the Joint Monitoring Mission:

-- The first Joint Monitoring Mission will last for 2 years
with the possibility of extension based on mutual agreement
among parties.

-- Joint Monitoring Mission will be staffed with Georgian and
Russian representatives and experts from international
organizations.


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-- The location of the Head office of the Mission to be
discussed.

-- Two Field offices will be located on Roki-Lower Zaramag
and Gantiadi-Adler customs check-points.

Functions of the Joint Monitoring Mission:

-- Ensure that customs rules and procedures are administered
in accordance with the relevant legislation of Georgia and
the Russian Federation, and consistent with WTO rules.

-- Prevent trafficking, money laundering, smuggling of
radioactive and other types of goods.

-- No independent enforcement responsibilities.

-- Ensure transparency and uniformity of customs
administration via permanent monitoring. On the Georgian
side, the administration of the concerned check-points will
be integrated in the system of overall monitoring of the flow
of goods in Georgia.

-- Oversee customs services as requested by means of checking
documentation and records (including computer databases).

-- Check suspicious cargo and passengers as requested by
either side.

-- Introduce customs check-point management and share
experience in accordance with international standards.

-- Assist in prevention of smuggling (through capacity
building, special training, and provision of equipment).

-- Carry out risk analysis and provide training regarding the
same upon request.
TEFFT