Georgia Bi-Weekly Update March 23

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E.O 12958: N/A
TAGS: PREL PGOV KPAO GG
SUBJECT: Georgia Bi-Weekly Update March 23



1. This cable contains current items of political, economic, and
social interest concerning Georgia during the weeks of March 11-23.

Investigation of MOD Finances under Okruashvili
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2. Georgian newspapers are reporting that the Audit Chamber has
formally forwarded to the Prosecutor General financial records from
the Defense Ministry during former Minister Irakli Okruashvili's
tenure. The Audit Chamber's inspection has reportedly uncovered
that Okruashvili embezzled GEL 75 million (around USD 44 million).
According to commentators, if this information is confirmed, the
Prosecutor General's Office will be obliged to start criminal
proceedings. Current Defense Minister Kezerashvili has ordered the
Ministry's own General Inspection Department to conduct a separate
investigation. A month before this story appeared, Okruashvili was
included on a published list of the richest Georgians with an
estimated wealth of USD 250 million, most of it presumably from a
lucrative law practice earlier in his career.

Former Television Director Returns
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3. The Georgian media has paid great attention to the return of
Erosi Kitsmarishvili, former owner and director of Rustavi-2
television, who has reportedly agreed to serve as a consultant to
the Georgian Public Broadcasting Service (GPBS). In Georgian
political circles Kitsmarishvili is seen as a kingmaker, famous for
Rustavi-2's role in the Rose Revolution reporting on the corruption
of Shevardnadze's regime and keeping the revolutionary movement on
the nation's television screens. Afterwards Kitsmarishvili
reportedly fell out with the new government, and he sold his station
and moved to New York. Many commentators suggest the government
wants Kitsmarishvili to "upgrade" the GPBS so that it can compete
with rival private stations, including Badri Patarkatsishvili's
Imedi TV as well as Kitsmarishvili's old station, Rustavi-2, which
has become strongly pro-government and is believed to have lost much
of its audience.

Controversy Surrounds Return of Gamsakhurdia's Body
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4. Georgian media have been filled with speculation on the final
resting place of former Georgian President Zviad Gamsakhurdia after
Prime Minister Noghaideli issued an order March 5 to bring his body
back from Russia. The body, reportedly recovered in a park in the
Chechen capital of Grozny, is currently undergoing testing in
Rostov-on-Don, Russia, to confirm its identity. Members of
Gamsukhurdia's family have been involved in a highly public spat
over where in Georgia he should be buried, with his widow and
younger son wanting the body to be buried in Tbilisi's newly built
Trinity Cathedral, while Konstantin Gamsakhurdia, an elder son from
Gamsakhurdia's first marriage, wants the body to be buried in the
Mtatsminda Pantheon. When some observers raised the possibility of
President Saakashvili resolving the controversy, Saakashvili
demurred, instead suggesting that a commission should make the
decision.

Tax Cheats in the Left Pocket
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5. A law enforcement operation targeting corruption landed 21 tax
inspectors and 11 businesspeople in detention on suspicion of
accepting and receiving bribes. Code-named "Left Pocket," the
combined operation by the Prosecutor General's Office, the Financial
Police, and the Interior Ministry's Constitutional Security
Department used hidden cameras in tax inspection offices to film
bribes paid by entrepreneurs to conceal their incomes. Several of
the enterprises involved had well-established reputations for
profitability and success.

Shah Deniz Gas Delivery Resumed
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6. On March 15, delivery of natural gas to Georgia from the Shah
Deniz field in Azerbaijan resumed. Deliveries had been suspended in
January, reportedly because of technical problems, thus leaving
Georgia fully dependent on Russian gas, the price of which jumped up
from USD 110 to USD 235 per thousand cubic meters starting from
January 1. The suspension of Shah Deniz gas had cast some doubts on
Georgia's ability to diversify its energy import sources, but the
announcement that starting from March 15 Georgia would get 1 million
cubic meters per day from Shah Deniz, in addition to the more than 1
million cm per day coming from other Azeri sources, helped alleviate
these concerns. The volume of the Azerbaijani gas supply will
increase after the full commissioning of wells in the field.

New Player Enters Mobile Phone Market
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7. Vimpelcom, the second-largest operator of cellular communication
in Russia, has entered Georgia's mobile phone market under the name
"Beeline" through a local subsidiary, Mobitel, Ltd. Initially,
Beeline will cover Tbilisi and Rustavi, with plans to expand
nationwide by the end of the year. Beeline launched operations in
Georgia with an initial rate of 2 tetri (about 0.85 cents) per
minute, much lower than the 28.8 tetri (about 17 cents) offered by
the two other players in the market: the American-owned Magti and
Turkish-Finnish-Georgian joint venture Geocell.

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