GEORGIA: BLUE LANTERN LEVEL 3: PRE-LICENSE END-USE

S E C R E T TBILISI 001559

SIPDIS

PM/DTCC FOR KYLE M. BALLARD

E.O. 12958: DECL: 08/18/2019
TAGS: ETTC KOMC SE UP BU GG
SUBJECT: GEORGIA: BLUE LANTERN LEVEL 3: PRE-LICENSE END-USE
CHECK ON LICENSE 050180371

REF: SECSTATE 79547

Classified By: Ambassador John F. Tefft for Reasons 1.4 (b) and (d).


1. (S) In response to reftel questions, Post provides the
following answers.


A. Can the Georgian Ministry of Defense (MOD) confirm the
order of the rifles and grenade launchers listed on this
license application? MOD's Letter of Intent and End-Use
Certificate date back to 2007 and 2008, respectively. Are
these documents still considered valid by MOD? Do these
documents still reflect MOD's intention to continue with this
transaction?
-- The requirement remains a valid one for the MOD. While
this was a needed order when made, it is no longer an
immediate need for MOD. However, Deputy Minister of Defense
for Acquisitions Otar Berdzenishvili told DATT that there is
no provision in the contract for return of Georgian funds if
the license is not approved. Thus, Bel Trading would keep
the total value of the contract whether the goods are
delivered or not. According to Berdzenishvili, the only
provision for return of the funds is if the M4s and/or M203s
do not meet military specifications; a sub-standard product
apparently is cause for voiding the contract while denial of
license is not. Since there is nothing to be gained by
denying the license, we ask PM/DTCC not/not to deny it even
though the need is not urgent.

B. What role is Seychelles-based Bel Trading and Consulting
playing in this transaction? How were you first introduced
to Bel Trading and Consulting? What are the terms of the
agreement between MOD and Bel Trading and Consulting in this
transaction? Is Bel Trading and Consulting receiving any
commissions for its services in this transaction?
-- According to Deputy Defense Minister Berdzenishvili, Bel
Trading is an Ukrainian company based in the Seychelles. Bel
Trading and the Georgian Ministry of Defense have had a
business relationship since 2006 and MOD has executed a large
number of contracts with the company. Berdzenishvili is
not/not satisfied with the performance of the company and is
actively seeking to terminate the relationship without losing
any Georgian government funds already paid. Berdzenishvili
expressed concern with Bel Trading's contracts (specifically
how contracts are written and executed). He noted examples
including a lack transparency, a lack of accountability
mechanisms, and a high commission rate to Bel Trading without
any performance standards. Bel Trading has also deceived the
MOD about the status of some of its signed contracts.
Berdzenishvili suspected Bel Trading of keeping large sums of
Georgian funds even though sales contracts are not moving
forward, and in some cases, licenses have been denied. He
does not intend to use Bel Trading again, but wants to
complete the contracts that are pending in order to not lose
already committed funds.

C. To your knowledge, are there any other companies involved
in this transaction aside from Bel Trading and Consulting and
the U.S. vendor? Are any other parties receiving fees or
commissions for services rendered in this transaction?
-- None known, but the contract does not specify.
TEFFT