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08TBILISI2378 2008-12-15 11:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Tbilisi
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DE RUEHSI #2378/01 3501144
O 151144Z DEC 08
					  UNCLAS SECTION 01 OF 05 TBILISI 002378 



E.O. 12958: N/A

1. (SBU) Summary: Your visit to Georgia comes in the
aftermath of the August conflict, which resulted in Russia's
occupation and recognition of the independence of South
Ossetia and Abkhazia. Tension along the de facto boundaries
remains high, and international monitors do not have 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 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 remain 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 fulfill their pledges
of assistance. Several new ministers were appointed between
December 5 and 9. The moves have generated little public
reaction and reflect no significant change in overall policy
direction, although some opposition voices have been critical.

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 which, 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

3. (SBU) During your visit, you will spend a full day at the
Parliament, meeting with Speaker David Bakradze and multiple
committees, as well as the two parliamentary opposition
factions. The current Parliament was elected in May, 2008,
following a period of internal political tumult that began
with protests in November 2007, and was followed by early
presidential elections in January 2008. Many of the MPs in
the current Parliament are new to politics. Speaker Bakradze
is a close ally of Saakashvili, and has used his role as
Speaker to represent Parliament domestically and
internationally. In the immediate aftermath of the war,
Parliament worked with all opposition forces, including those
outside of Parliament, in forming the Anti-Crisis Council
(ACC). Later, the Parliament formed the above-mentioned
investigatory commission to examine the August conflict.
Both the ACC and investigatory commission are chaired by
opposition MPs, whom you will meet.
Qopposition MPs, whom you will meet.

4. (SBU) In addition to a day in Parliament and a trip to
Gori, you will meet President Saakashvili. 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,
development and recovery efforts, and to encourage the
president to support an even more robust and pluralistic
democratic system and greater media freedom. You will also
have the opportunity to discuss economic and domestic
challenges with other members of the government. End Summary.


5. (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.
The country watched on live TV as the President sat before
the Committee for five hours, first reading a prepared
statement and then answering the questions. 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

TBILISI 00002378 002 OF 005

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

6. (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
Movement (UNM), has an overwhelming majority in Parliament in
part because some opposition leaders rejected their seats.
One opposition faction, the Christian Democrats, accepted its
seats 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.


7. (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 Sikharulidze. 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.


8. (SBU) The current Parliament was elected in May,
following a period of internal political instability which
began with street protests in November 2007. The size of the
Parliament was reduced from 235 seats to 150 in May, with 75
filled from national party lists and 75 as single-mandate
Qfilled from national party lists and 75 as single-mandate
"majoritarian" seats. The ruling United National Movement
(UNM) party won 59 percent of the vote, and took 119 out of
150 seats in the new Parliament. The "United Opposition"
fractured, as some members alleged the elections were rigged
and illegitimate. Following intense negotiation, the
Christian-Democratic Movement (CDM), five MPs from the nited
Opposition, two majoritarians and two Labor Party candidates
joined the new Parliament. Twelve opposition members refused
their mandates entirely. Four Labor Party candidates have
neither refused their mandates, nor taken their seats. Two
vacant majoritarian seats were filled via by-elections in
November. The remaining party list seats will remain vacant
for the duration of this Parliament. It is important to note
that due to the electoral system, there is no residency
requirement for the majoritarian seats; consequently, MPs are
seldom closely tied to a geographic constituency.

9. (SBU) Parliament had barely coalesced in July, when the
August invasion derailed its budding initiatives. Now,
Parliament is trying to help determine what went wrong, help
fix it, and ensure it does not happen again. Weakened
somewhat as a check on the executive branch over the past few

TBILISI 00002378 003 OF 005

years, the new Parliament must show its mettle. Many of the
MPs in the current Parliament are new to politics, without
significant legislative or governmental experience. Speaker
Bakradze, who is close to Saakashvili, has taken the lead on
representing Parliament domestically and internationally, and
is now trying to bolster Parliament to rise again as an
effective broker for the people of Georgia. In the immediate
aftermath of the war, Parliament worked with all opposition
forces, including those outside of Parliament, to forming the
Anti-Crisis Council (ACC). Later, the Parliament formed an
investigatory commission to analyze the August conflict and
the events precipitating it; the commission conducted weeks
of testimony, capped off by a five-hour public appearance by
President Saakashvili during which he offered an explanation
for the actions taken during the August conflict. The
commission's final report is due out in the near future. You
will have the opportunity to meet with both groups during
your visit.


10. (SBU) On the issue of broader political reform, the
government released a document laying out a variety of
planned political reforms to improve democracy and pluralism
in Georgia. The ACC is involved in implementing many of
these reforms. 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
on President Saakashvili's reform promises.


11. (SBU) On the economic front, the Georgian economy seems
to be recovering slowly, after the shock of Russia's August
invasion. 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 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
Qinvestment (FDI) for growth. The conflict has slowed the FDI
stream considerably, and the government seeks to 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.

12. (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. 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, 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

TBILISI 00002378 004 OF 005

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.


13. (SBU) The situation on the ground along the
administrative boundary lines of Abkhazia and South Ossetia
remains very tense and is unlikely to improve soon. Violent,
even fatal, incidents are frequent, primarily caused by
Russia, Abkhaz or South Ossetian soldiers, and carry
considerable risk of escalation. On December 10, unknown
assailants fired at and hit a marked OSCE armored patrol
vehicle with automatic rifle fire, near the South Ossetian
administrative boundary. 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.

14. (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
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. In Abkhazia, several hundred cannot return to
their homes, 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 hundreds of
thousands of IDPs from earlier conflicts, have created
significant humanitarian challenges. The government has
Qsignificant 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
is being paid to the new IDPs, 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.

15. (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. We
hope that this forum can provide a space to address the more
urgent issues, such as security. However, consideration of
the thornier issues, such as the final political status of
the two regions, will likely be postponed for some time.

TBILISI 00002378 005 OF 005


16. (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 topresent 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.