GEORGIA: SCENESETTER FOR THE VISIT OF SENATOR JOHN

UNCLAS SECTION 01 OF 04 TBILISI 002303 SENSITIVE SIPDIS H - PLEASE TO PASS TO SENATOR KERRY FROM AMBASSADOR TEFFT E.O. 12958: N/A TAGS: PGOV PREL GG SUBJECT: GEORGIA: SCENESETTER FOR THE VISIT OF SENATOR JOHN KERRY TO TBILISI ¶1. (SBU) Summary: Your visit to Georgia comes in the aftermath of the August conflict, which resulted in Russia's occupation of and recognition of the independence of South Ossetia and Abkhazia. Tension along the de facto boundaries remains high, and no international monitors have had access to South Ossetia. Although many of those displaced by the war have returned to their homes, those displaced from South Ossetia itself and part of Abkhazia have not been granted access to return. The war is still the dominant political issue in Georgia. On November 28, in an unprecedented event, President Saakashvili voluntarily defended his wartime decisions in testimony in front of a Parliamentary commission investigating the war. Saakashvili remains an unrivaled figure who drives Georgian politics, but his wartime decisions have drawn significant criticism. Opposition parties and leaders are largely fractured and have not yet coalesced into a credible electoral alternative. In October, Saakashvili named Grigol Mgaloblishvili (former Georgian Ambassador to Turkey) as Prime Minister, who has been charged with ensuring that international donors fufill their pledges of assistance. The move generated little public reaction and reflects no significant change in overall policy direction. ¶2. (SBU) Domestically, the government of Georgia is focused on reconstruction of damaged infrastructure, supporting the economy, and exploring ways to integrate an estimated 30,000 newly displaced persons into undisputed Georgian territory, at least temporarily. The global economic downturn, coupled with the fallout of the August conflict, has slowed a once vibrant Georgian economy that prior to the war enjoyed double-digit growth rates and was the 15th best place in the world to do business. In 2009, the government will be heavily dependent on foreign aid to achieve many of its reconstruction goals. The USG has pledged $1 billion in total support and in November, transferred $250 million of direct budget support to the Georgian Government. A total of $4.5 billion of aid was pledged to Georgia at an October Donors Conference in Brussels, to be distributed over three years, although to date little - other than US assistance - has been disbursed. Thus far, the government has weathered both the military and economic storms remarkably well and Saakashvili remains popular, but substantial challenges remain. ¶3. (SBU) While in Tbilisi you will meet the President for lunch. You may want to congratulate Saakashvili for his openness to public inquiry and commitment to a new round of democratic reforms, to express support for Georgia's territorial integrity and development and recovery efforts, and to encourage the president to support an even more plualistic democratic and system and greater media freedom. You will also have the opportunity to discuss economic challenges with the Prime Minister, compare legislative notes with the Speaker of the Parliament Bakradze and meet with leading members of the opposition both inside and outside of Parliament. End Summary. SAAKASHVILI: STANDING TALL IN THE AFTERMATH OF THE WAR, BUT FACING CHALLENGES ¶4. (SBU) In an effort to counter growing Russian PR efforts to define the conflict, at the end of November, President Saakashvili voluntarily testified in front of Parliament in what has been dubbed a first in the post-Soviet space. The country watched on live TV as the President sat before the Commission for nearly five hours, first reading a prepared QCommission for nearly five hours, first reading a prepared statement and then answering the questions of the commissioners. Saakashvili admitted readily that he had made the decision for Georgian ground forces to enter South Ossetia in order to protect Georgian citizens in the territory. Saakashvili defended the decision as "inevitable," because Russian troops were advancing into South Ossetia and Georgian-controlled villages were being heavily shelled. Saakashvili claimed repeated attempts to speak with Russia's leaders and stop hostilities were rebuffed, and that he and the government were left no choice but to try and defend Georgia's citizens and sovereignty by force. Saakashvili argued that any responsible democratic government in Georgia would have reached the same decision. He said Georgia was neither a loser nor a winner in the war, as the struggle continues. However, he said the invasion demonstrated once and for all that Russia could not be considered a "peacekeeper" in Georgia. ¶5. (SBU) Despite the conflict, President Saakashvili remains broadly popular in the wake of the August conflict. A September USAID-funded International Republican Institute (IRI) poll suggests Saakashvili continues to benefit from a public seeking stability. His party, the United National TBILISI 00002303 002 OF 004 Movement (UNM),has an overwhelming majority in Parliament in part because some opposition leaders rejected their seats to protest what they term as unfair parliamentary elections last March. One opposition faction, the Christian Democrats, accepted its mandates in Parliament and has seen its public standing grow. The remaining opposition appears fractured; some are calling for new parliamentary and presidential elections and staging protests, while others are starting to doubt the utility of constant protests and unpopular ultimatums urging the President to resign. According to the IRI poll, the popularity and standing of opposition politicians have dropped and no figure has emerged to be the leader of a coherent opposition movement. ¶6. (SBU) The situation has begun to shift in recent weeks. On November 23, since the poll was conducted, former Saakashvili confidant Nino Burjanadze launched her own party, Democratic Movement-United Georgia, which hopes to present a credible alternative to President Saakashvili and the UNM. On December 5, Georgian Ambassador to the UN Irakli Alasania tendered his resignation. Alasania has long been courted by both the government and the opposition, and appears to be on the verge of announcing his future political intentions. In the wake of Alasania's resignation, Prime Minister Mgaloblishvili announced two rounds of cabinet changes. On December 6, Grigol Vashadze, current Minister of Culture and former Deputy Foreign Minister, was named Foreign Minister. Nika Gvaramia, a former Justice Minister, was named the Education Minister. Georgia's Defense Minister during the conflict, Davit Kezerashvili, was initially replaced by his deputy Batu Kutelia on December 5, and then Kutelia was replaced December 9 by Georgia's Ambassador to the United States, David Sakharulidze. Also on December 9, Lasha Zhvania, Chairman of the Parliamentary Committee for Foreign Affairs and former Georgian Ambassador to Israel, replaced Eka Sharashidze as Minister of Economic Development, and MP Nika Rurua, Deputy Chairman of the Committee for Defense and Security since 2004, became Minister of Culture. The new line-up indicates Saakashvili's interest in bringing more dependable loyalists into the Cabinet and preempting recommendations to make changes expected from the special parliamentary committee investigating the war. ¶7. (SBU) On the issue of broader political reform, the government has released a document laying out a variety of planned political reforms to improve democracy and pluralism in Georgia. The document acknowledges the mistakes the government made in its use of force to quell protests in November 2007. The document closely follows President Saakashvili's September "State of the Nation" address to Parliament and his address to the UN General Assembly, in which he outlined his vision for a more democratic Georgia. The proposed (and in some cases completed) reforms include measures to strengthen Parliament; increase judicial independence; strengthen and increase the role of the opposition; and foster a more open media environment. Opposition members are skeptical of government motivations and are not satisfied with the breadth and pace of reforms. Opposition leaders are calling for, among other things, a freer and more fair media environment; a change to the electoral code; and more opposition access to decision-making. In spite of opposition dissatisfaction, Saakashvili's administration appears committed to making good QSaakashvili's administration appears committed to making good on President Saakashvili's reform promises. THE ECONOMY: RECOVERING, BUT UNDER STRAIN ¶8. (SBU) On the economic front, the Georgian economy seems to be recovering albeit slowly, after the shock of the Russian invasion in August. Preliminary estimates for negative growth have been revised and the government privately expects total GDP growth for 2008 to be around 4-5 percent, well below last year's growth of 12 percent. The GOG is predicting four percent GDP growth for 2009, although some commentators suggest this figure is too optimistic, and will likely be closer to two percent. The real test of the economy will come in the first quarter of 2009 when revenues traditionally slow. The government has real concerns that unemployment numbers could skyrocket as businesses re-evaluate their business in light of the August conflict and overall global financial crisis. While still weakened, the banking sector has been resilient and some modest lending has resumed. A recent devaluation of the Georgian lari proceeded smoothly, but the public is wary that further devaluation is likely as the dollar continues to appreciate. The overall credit crisis still threatens the recovery of the Georgian economy, which is heavily dependent on foreign direct investment (FDI) for growth. The conflict has slowed the FDI stream considerably, and the government seeks to TBILISI 00002303 003 OF 004 reassure investors about the stability of Georgia's market. A Deputy Secretary of Commerce-led trade delegation in October was greatly appreciated by the Government and led to several new investment deals. ¶9. (SBU) Georgia does not appear to face immediate- or medium-term liquidity problems. Tax collection has resumed to normal levels, although the government fears a difficult first and second quarter when budget revenues generally slow. The government worries that a slowing local and global economy will exacerbate this problem, but hopes to be able to fill some budgetary holes with foreign aid. In general, the Georgia is committed to its long-term growth strategy of lowering taxes and simplifying the tax code; reducing financial and business regulations to foster an open business climate; aggressively privatizing government held assets; and focusing funding on infrastructure projects to provide for long term economic growth. The conflict has forced the government to redirect some of its spending to acute social needs, in particular those of internally displaced persons (IDPs). However, the long-term economic plan remains intact. Georgia's economic team has seen success in the past: in 2008, Georgia was named the 15th best country in which to do business by the Economist. The economy will continue to be a key domestic issue as the President Saakashvili and the ruling National Movement have substantially staked their electoral fortunes on the ability to provide robust economic growth. THE CONFLICTS: STILL TENSE, WITH URGENT SECURITY AND HUMAN RIGHTS CONCERNS ¶10. (SBU) The situation on the ground along the administrative boundary lines of Abkhazia and South Ossetia remains very tense and is unlikely to improve in the short term. Violent, sometimes fatal incidents are frequent, primarily caused by Russia, Abkhaz or South Ossetian soldiers, and carry considerable risk of escalation. Three international organizations monitor the situation and help deter the resumption of hostilities: the UN Observer Mission in Georgia (UNOMIG),which operates inside and outside Abkhazia; the OSCE Mission to Georgia, which currently operates outside South Ossetia; and the EU Monitoring Mission (EUMM),which currently operates outside both regions. Both the OSCE and EUMM have been effectively blocked from crossing the boundaries, which limits their effectiveness; no international organization except for UNHCR has regular access to South Ossetia, increasing the concern of humanitarian crisis. Russia has publicly announced it will maintain 3,800 troops in each of the breakaway regions and is reportedly building military bases in both. Although the EUMM has been working with the Georgian government to keep its military forces away from the boundaries, no international organization has been able to work on this issue with the Russians or the de facto governments on the Abkhazian and South Ossetian sides. The international community therefore has little means to determine if the Russian and de facto governments are taking steps to prepare for renewed hostilities. ¶11. (SBU) Points 3 and 5 of the August 12 cease-fire agreement respectively require free access for humanitarian assistance to the conflict zones and the withdrawal by Russian forces to their positions held before the war. Russia and the de facto authorities, in particular the South Ossetians, have not provided free access to humanitarian organizations, and Russia has not withdrawn its forces to Qorganizations, and Russia has not withdrawn its forces to their pre-war positions. Particularly egregious examples include the massive increase of Russian military presence in both regions and the occupation of the Akhalgori Valley in eastern South Ossetia, which before the war was outside of the "zone of conflict," was administered by Georgian authorities and had no Russian presence. The lack of access by humanitarian organizations, in particular to South Ossetia, has left the international community unable to answer serious questions about the human rights situation in both regions and with no ability to investigate the charge that the South Ossetians engaged in ethnic cleansing. Over 20,000 displaced persons from South Ossetia cannot return to their homes, several hundred cannot return to their homes in Abkhazia, and there is considerable evidence of an intentional campaign to drive ethnic Georgians from their homes, then destroy those homes to prevent their return. A total of about 30,000 new IDPs, combined with hundred of thousands of IDPs from earlier conflicts, have created significant humanitarian challenges. The government has impressively managed to build several thousand new homes for many of the new IDPs in time for winter, but longer-term needs remain, such as jobs. However, as increased attention TBILISI 00002303 004 OF 004 is being paid to the newly displaced, an older generation of IDPs from the 1993-94 war with Abkhazia, numbering more than 225,000, is beginning to feel resentment for what it considers years of neglect. ¶12. (SBU) On the political level, the EU has taken the lead in starting a process of international discussions in Geneva (in accordance with Point 6 of the cease-fire). Official parties to the talks are the EU, OSCE, UN, Georgia, Russia and the U.S.; there has been considerable controversy over the informal participation of the de facto authorities, as well as representatives of Tbilisi-supported Abkhaz and South Ossetian groups. The second round of talks on November 18-19 went reasonably well, with all participants willing to accept security/stability and IDP returns as the basic areas for discussion. The next meeting will be on December 17-18. Although we hope that this forum can provide a space to address the more urgent issues, such as security, consideration of the thornier issues, such as the final political status of the two regions, will likely be postponed for some time. GEORGIA AND NATO ¶13. (SBU) Georgian government officials hailed the December NATO Ministerial in Brussels as a victory for Georgia. They said the decision to intensify cooperation between Tbilisi and NATO and invigorate the NATO-Georgia Commission (NGC) would play a central role in moving Georgia toward membership. Opposition figures, however, have been more critical, stating that the ministerial's result is not a victory, but a significant loss. They blame Saakashvili for ruining Georgia's chances at MAP. Both the government and opposition are trying to present the Brussels Ministerial to their advantage. Opposition attacks on the issue are stronger than in the past, and the fact that MAP appears off the table provides an opening on a key Saakashvili policy objective. Russian Prime Minister Putin was also widely quoted in the Georgian press as hailing the decision in yet another stab at the Saakashvili government. In spite of the Government's best efforts, some Georgians see Brussels as a defeat for the U.S. and for Georgia and are questioning Georgia's Euro-Atlantic strategic choice. In spite of that, for now, most Georgians support membership in NATO and still see it as their strongest, irreversible step into the West. TEFFT