Monthly Archives: December 2005

05TBILISI3250, GEORGIAN SUPPORT ON IRAQ DECEMBER 15 ELECTION

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Reference ID Created Released Classification Origin
05TBILISI3250 2005-12-14 07:37 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Tbilisi

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UNCLAS TBILISI 003250 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PREL PGOV GG
SUBJECT: GEORGIAN SUPPORT ON IRAQ DECEMBER 15 ELECTION 
 
REF: SECSTATE: 220728 
 
(SBU) Per reftel, poloff delivered talking points to the 
First Secretary of Ministry of Foreign Affairs Americas Desk, 
Irakli Machitidze.  Machitidze said that Georgia issued a 
statement congratulating Iraq on its successful 
constitutional elections last year. He thought it would be 
possible to do so again this year. He said he would also try 
to include supportive remarks on Iraq's election into Foreign 
Minister Gela Bezhuashvili's upcoming speech at the Carnegie 
Institute for Peace on December 17. 
 
TEFFT

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05TBILISI3226, ABKHAZIA: THE NEED FOR CONFIDENCE BUILDING

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05TBILISI3226 2005-12-12 13:11 2011-08-30 01:44 CONFIDENTIAL Embassy Tbilisi

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C O N F I D E N T I A L  TBILISI 003226 
 
SIPDIS 
 
 
DEPT FOR DAS BRYZA, EUR/CACEN AND EUR/SNEC 
 
E.O. 12958: DECL: 12/12/2015 
TAGS: PGOV PREL GG
SUBJECT: ABKHAZIA:  THE NEED FOR CONFIDENCE BUILDING 
MEASURES 
 
Classified By: AMBASSADOR JOHN F. TEFFT.  REASONS:  1.4 (B) AND (D). 
 
1. (C)  Summary:  During a December 6 and 7 visit to 
Abkhazia, the Abkhaz and Georgians agreed ad ref to a draft 
of the joint declaration on security guarantees and the 
return of internally displaced persons, the European 
Commission launched a program of economic rehabilitation in 
the conflict areas, and Ambassador Tefft met with a range of 
de facto officials.  In every meeting, Ambassador emphasized 
that the U.S. supports the territorial integrity of Georgia 
and the peaceful resolution of the conflict.  The Abkhaz 
stated their desire for independence and their concern over 
the militant rhetoric of some Georgian leaders.  They 
welcomed increased assistance from the U.S. and increased 
exposure to American values and culture.  They praised the 
planned USAID-funded joint Abkhaz-Georgian study tour to the 
U.S.  End summary. 
 
--------------------------------------------- -------- 
EC Commits 4 Million Euros to Rehabilitation Projects 
--------------------------------------------- -------- 
 
2. (C) On December 6 and 7 Ambassador, accompanied by Poloff, 
traveled to Abkhazia to attend the first meeting of the 
Steering Committee of a joint EC-UNDP-UNOMIG Rehabilitation 
Program in the conflict zone and to hold other official 
meetings.  Representatives of the Friends of the Secretary 
General (FSG) -- UK, Germany, France and Russia -- were also 
present for the meeting.  The program plans to restore basic 
services such as electricity, public health, water 
sanitation, waste management and agricultural development on 
both sides of the conflict over the next two to three years. 
Total funding will be 4 million Euros. 
 
3. (C) State Minister for Conflict Resolution Giorgi 
Khaindrava led the Georgian delegation to the meeting - 
marking the first time many Georgians had been to Abkhazia 
since the war ended in 1993 - and de facto foreign minister 
Sergey Shamba led the Abkhaz delegation.  Both Khaindrava and 
Shamba noted that economic rehabilitation would help lay the 
foundation upon which confidence could be built between the 
sides.  Khaindrava emphasized that the Georgian position of 
support of the program reflects its cooperative approach to 
resolving the conflict.  Shamba said the sides were close to 
agreement on the joint declaration on the return of 
internally displaced persons (IDPs). 
 
--------------------------------------------- ---------- 
Bagapsh Says Everything Flows from Economic Development 
--------------------------------------------- ---------- 
 
4. (C) Following the UN meeting, the FSG met de facto 
president Bagapsh, together with de facto prime minister 
Ankvab and other de facto officials.  Speaking on behalf of 
the FSG, German Chair Ambassador Schramm encouraged the sides 
to come to agreement on the joint statement on security 
guarantees and on the return of IDPs, the latest draft of 
which had just been delivered to the Abkhaz.  Schramm noted 
the deteriorating human rights situation in Gali and urged 
the Abkhaz to follow through on commitments to open a human 
rights office and allow the deployment of civilian police 
there. 
 
5. (C) Bagapsh said he was also concerned about Gali.  He 
claimed the worsening situation is the result of actions by 
certain people with an interest in creating an unstable 
situation there.  He pointed to former Georgian militia 
fighters, who he claimed recently appeared in the region.  He 
claimed that there was an explosion of criminality and 
abduction only after these individuals arrived and began 
making public statements.  Bagapsh said the Abkhaz would not 
allow the situation to spiral out of control or let anyone 
else accomplish this goal. 
 
6. (C) Bagapsh expressed concern about what he considered the 
militarization of Georgia and pointed specifically to  the 
opening of a Georgian military base in Senaki, located on the 
border with Abkhazia.  He highlighted Saakashvili's speech to 
a Georgian Youth Camp last summer where Saakashvili 
emotionally emphasized the importance of returning Abkhazia. 
Bagapsh said South Ossetian leader Kokoity had reported a 
similar trend in South Ossetia:  the Georgians had placed a 
military hospital and MOI troops close to the border area. 
This, he said, is increasing tensions there. 
 
7. (C) Bagapsh said the Abkhaz are committed to a peaceful 
negotiation of the conflict.  With regard to the human rights 
office and police force in Gali, he said the issue "is not 
crossed off the agenda."  He said he thought it would be 
resolved step-by-step and suggested a package deal involving 
economic incentives.  He asked how the Abkhaz could speak of 
human rights when Gali is in a state of economic collapse. 
 
 
With regard to the recent Abkhaz law on citizenship, Bagapsh 
said that his statement was misconstrued and aimed at 
removing only the criminal element there. 
 
8. (C) Ambassador Tefft said he was glad to hear Bagapsh did 
not rule out opening a human rights office and encouraged 
Bagapsh to build upon the positive statements made by 
Khaindrava and Shamba.  He raised concerns over
the new 
citizenship law.  Bagapsh claimed he was misquoted and that 
his remarks applied only to criminals in Gali.  Ambassador 
asked  where the Abkhaz and Georgians might find common 
ground.  Bagapsh responded with a list including energy, 
railway, highways, and sea/air connections.  He concluded 
that everything flows from economic development. 
 
--------------------------------------------- ---------------- 
Shamba:  Argues for Independence, but Open to U.S. Cooperation 
--------------------------------------------- ----------------- 
 
9. (C) De facto foreign minister Sergey Shamba made the case 
for Abkhaz independence.  He claimed that not a single 
politician would consider joining Georgia today.  He said the 
economic embargo and militant rhetoric from Georgia make it 
impossible to change public opinion.  Ambassador said the 
U.S. supports the territorial integrity of Georgia and that 
great leaders lead their publics toward peaceful solutions. 
Shamba agreed that war would not be in the interest of 
Abkhazia or Georgia.  This, he said, could be the match that 
lights the Caucasus. 
 
10. (C) Ambassador said the U.S. is open to doing more with 
Abkhazia.  He offered as an example a visit by an American 
Bluegrass Band next year.  Shamba welcomed the idea and cited 
the popularity of American film, culture and music.  He said 
he hoped to see a more active American presence in Abkhazia 
and more such opportunities, including especially for Abkhaz 
youth.  Referring to the planned joint study tour to U.S., 
Shamba asked if all 12 candidates (instead of 10) could 
attend.  Ambassador said he would consult with the AID 
Director in Tbilisi. 
 
--------------------------------------------- ------------- 
NGO leaders:  U.S. and Others Pushing Abkhaz Toward Russia 
--------------------------------------------- ------------- 
 
11. (C) Ambassador met with a group of NGO leaders, including 
many representatives from Natella Akaba's Association of 
Women of Abkhazia.  The leaders reaffirmed the Abkhaz 
position on independence and claimed that the West is pushing 
Abkhazia toward Russia as they may not travel Abkhazia except 
through Russia and by taking Russian citizenship.  They said 
they were free to have connections with NGO leaders in 
Georgia but public opinion prevents much interaction. 
 
12. (C) They expressed many concerns also raised by Bagapsh, 
including about the situation in Gali and the belief that 
they Georgian militia fighters were behind them.  The leaders 
also reiterated Abkhaz concerns about the militarization of 
Georgia.  90% of Abkhaz, one said simply, think Georgia is 
preparing for war.  They expressed concern over statements 
made by Saakashvili, Burjanadze and others about returning 
Abkhazia to Georgia. 
 
13. (C) They defended the Abkhaz citizenship law by saying 
that a Georgian who does not want Abkhaz citizenship may be a 
resident in Abkhazia.  They acknowledged that the law allows 
dual Abkhaz-Russian citizenship but not Abkhaz-Georgian. 
They said that it would not be possible to consider dual 
Abkhaz-Georgian citizenship as long as Abkhazia remains in a 
state of war with Georgia. 
 
--------------------------------------------- ---------- 
Dinner with Both Sides:  Agreement to Joint Declaration 
--------------------------------------------- ---------- 
 
14. (C) Khaindrava and Bagapsh unexpectedly joined a dinner 
hosted by Shamba that evening.  SRSG Tagliavini as well as 
the British and German representatives of the FSG and members 
of Shamba's staff also joined.  At the dinner, which followed 
an internal meeting of the de fact Abkhaz authorities, 
Tagliavini announced that there was ad ref agreement to the 
latest draft of the joint declaration on security guarantees. 
 
 
--------------------------------------------- ---------- 
Ankvab:  Widen Connections between Georgians and Abkhaz 
--------------------------------------------- ---------- 
 
15. (C) In a private meeting with Ambassador and Poloff, de 
facto prime minister Alexander Ankvab briefed on the poor 
economics of Abkhazia.  Out of a budget of 644 million Rubles 
($25.7 million), 25% goes to defense.  Shipments of the 
 
 
biggest export, citrus, are down from 110,000 metric tons 
before the war to 35,000 metric tons today.  He explained 
Russian investment as a result:  $25 million in mandarin 
processing, $15 million in wine production, and $25.6 million 
to pave the road north of Sukhumi.  He said the Russians also 
pay about $1 million dollars in pensions to 26,000 of the 
51,000 pensioners in Abkhazia. 
 
16. (C) Ankvab provided a long list of the challenges he 
faces as a result of destroyed or out of date infrastructure. 
 He pointed to serious problems with electricity, water 
supply, waste management, telecommunications, and public 
transport.  He said there is no ability to care for the sick, 
elderly and mentally ill, no medical care in the villages, 
and 163 secondary schools need repair.  He said he could go 
on. 
 
17. (C) Still, Ankvab made the case for independence, saying 
the Abkhaz do not belong to anyone and it is a natural right 
to be free.  Ankvab said Georgia made a strategic mistake on 
August 14, 1992, when Georgia attacked just as the Abkhaz 
parliament was about to agree to a federation with Georgia. 
He said the history of Georgia had compromised the idea of a 
common life together and much more time needed to pass before 
finding common ground.  When asked how to get there, Ankvab 
suggested widening the connection between Georgia and 
Abkhazia through railway and other projects. 
 
--------------------------------------------- ------------ 
Bagapsh:  Leaves Open a Small Possibility for Negotiation 
--------------------------------------------- ------------ 
 
18. (C) In a private meeting with Ambassador and Poloff, de 
facto president Sergey Bagapsh said the Abkhaz hoped for 
peaceful coexistence with Georgia.  He said that Abkhazia 
does not plan to go with Russia or with Georgia.  Instead, he 
said, Abkhazia wants to build a state that is part of Europe. 
 He argued for developing the economy as a way to achieve 
more contacts with Georgians.  He said he is concerned about 
the situation in Gali and thought a statement by the FSG 
might be useful.  Bagapsh also expressed concern about 
Saakashvili's militant rhetoric.  He said a war with Abkhazia 
would ignite the region. 
 
19. (C) Ambassador said that the U.S. supports the 
territorial integrity of Georgia and has publicly and 
privately said to Georgia that the U.S. supports only the 
peaceful resolution of the conflict.  Ambassador noted in 
particular the tremendous gulf between the way each side 
interprets the actions of the other.  He encouraged Bagapsh 
to continue with confidence-buildi
ng measures and said the 
U.S. would look for ways to build bridges between the Abkhaz 
and Georgians. 
 
20. (C) In response to Ambassador's question about the 
citizenship law and the human rights office, Bagapsh defended 
the citizenship law by asserting that criminals were hiding 
in Gali under the protection of Georgian passports.  He did 
not see a need for a human rights office but implied this 
issue would be resolved in time.  With regard to agreement 
with Georgians, Bagapsh left the door open for negotiations 
with Georgia, saying that the Abkhaz are ready to listen but 
that time was required to heal the wounds of the 1990s. 
 
--------------------------------------------- -- 
Ashuba:  Abkhaz Want to Meet European Standards 
--------------------------------------------- -- 
 
21. (C) de facto parliamentary head Nugzar Ashuba said the 
Abkhaz are trying to meet European standards and hoped even 
to adopt European legislation.  He lamented that due to a 
lack of direct ties to Europeans they model themselves on St. 
Petersburg, which had ties to the European Parliament. 
Ashuba made no apologies for not allowing dual 
Abkhaz-Georgian citizenship.  He said that the only reason 
the law allows dual citizenship with Russia is practical: 
without a Russian passport the Abkhaz could not travel.  As 
soon as the world recognizes our independence, he said, we 
will change the law.  He acknowledged that a Georgian without 
Abkhaz citizenship would not have the right to participate in 
politics or referenda. 
 
------- 
COMMENT 
------- 
 
22. (C) The Abkhaz we spoke to exhibited no desire to be 
under the thumb of Russia any more than they want to be a 
part of Georgia.  Although every interlocutor expressed the 
Abkhaz desire for independence, they implicitly accepted that 
final status needed to be negotiated with Georgia.  Nor did 
they attempt to disguise the economic pressure they labor 
 
 
under.  The de facto president, prime minister and foreign 
minister all emphasized the need for time and confidence- 
building measures (particularly in the economic field) to 
resolve the problem.  They did not deliver legalistic 
lectures and sought to convey an openness to more U.S. 
contacts.  End comment. 
TEFFT

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05TBILISI3216, S&P RATES GEORGIA AT B+ LONG TERM, B SHORT TERM

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Reference ID Created Released Classification Origin
05TBILISI3216 2005-12-09 13:18 2011-08-30 01:44 UNCLASSIFIED Embassy Tbilisi

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS TBILISI 003216 
 
SIPDIS 
 
DEPT PLEASE PASS EB/IFD/DIA 
 
E.O. 12958: N/A 
TAGS: EFIN ECON GG
SUBJECT: S&P RATES GEORGIA AT B+ LONG TERM, B SHORT TERM 
 
 
1. On December 6, Standard & Poor's Ratings Services assigned 
its 'B ' long-term and 'B' short-term sovereign credit 
ratings to the government of Georgia.  This is Georgia's 
first sovereign credit rating.  S&P says the ratings are 
"supported by the government's strong political commitment to 
prudent financial policies and market-oriented structural 
changes, including tax reforms and the recent acceleration of 
privatization.  The ratings are constrained by weak external 
liquidiy, still-high inflation, and substantial 
infrastructure development needs, in the context of a poor 
institutional framework and political uncertainty arising 
from regional conflicts." 
 
2. Comment: GoG officials were pleased with the December 6 
rating, which puts a stamp of approval on their recent 
efforts.  According to a US Treasury advisor to the GoG, 
S&P's "outlook positive" distinction means the rating can be 
reviewed soon.  End Comment. 
TEFFT

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05TBILISI3215, GEORGIA’S PARTICIPATION IN WORLD BANK DEVELOPMENT

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Reference ID Created Released Classification Origin
05TBILISI3215 2005-12-09 13:17 2011-08-30 01:44 UNCLASSIFIED Embassy Tbilisi

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS TBILISI 003215 
 
SIPDIS 
 
DEPT PLEASE PASS TO WORLD BANK 
 
E.O. 12958: N/A 
TAGS: ECON SENV GG
SUBJECT: GEORGIA'S PARTICIPATION IN WORLD BANK DEVELOPMENT 
MARKETPLACE COMPETITION 
 
REF: SECSTATE 209612 
 
Per reftel, Embassy officers delivered information about the 
2006 World Bank Development Marketplace Competition on 
November 25.  The short timeframe did not allow any 
organizations to prepare a proposal, but Embassy officers 
used the opportunity to alert them about next year's 
competition. 
TEFFT

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05TBILISI3214, COMMENTS ON BANK OF GEORGIA’S APPLICATION FOR OPIC

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Reference ID Created Released Classification Origin
05TBILISI3214 2005-12-09 13:16 2011-08-30 01:44 UNCLASSIFIED Embassy Tbilisi

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS TBILISI 003214 
 
SIPDIS 
 
DEPT PLEASE PASS TO OPIC: KENNETH ANGELL 
 
E.O. 12958: N/A 
TAGS: ECON SENV GG
SUBJECT: COMMENTS ON BANK OF GEORGIA'S APPLICATION FOR OPIC 
FINANCE 
 
REF: SECSTATE 209017 
 
1.  In response to reftel, post knows of no information about 
Bank of Georgia's (BOG) shareholders that would cause us not 
to support the project.  Econoff met on December 8 with Lado 
Gurgenidze, BOG's CEO, to discuss the OPIC loan to expand its 
residential mortgage loan program.  According to Gurgenidze 
and other sources, the residential mortgage sector is 
booming, and there is a large demand for mortgage products. 
BOG seeks to meet this demand.  Gurgenidze did mention that 
OPIC's loan of $10 million will be able to see them through 
one quarter, after which they would seek additional funding 
from other sources.  The bank currently has insufficient 
equity to fund ten-year mortgages, Gurgenidze said. 
 
2. Regarding the question in reftel about developments in the 
residential mortgage sector, according to Gurgenidze, BOG is 
the only bank which publishes its mortgage portfolio 
information, which is about GEL 36 million with 1200 
mortgages.  These mortgages are for both home purchases and 
renovations.  Since BOG holds about 40 percent market share 
in the mortgage sector, he estimates that the total of 
outstanding mortgages in the sector is approximately GEL 
100-120 million. 
TEFFT

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05TBILISI3205, GEORGIA/ANTI-MONEY LAUNDERING PROSECUTION

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Reference ID Created Released Classification Origin
05TBILISI3205 2005-12-09 03:48 2011-08-30 01:44 UNCLASSIFIED Embassy Tbilisi

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 TBILISI 003205 
 
SIPDIS 
 
STATE FOR INL, EUR/ACE, EUR/CACEN 
DOJ FOR OPDAT (LEHMANN/NEWCOMBE), AFMLS, OCRS (STONE) 
FBI FOR PHILLIP GADD 
 
E.O. 12958: N/A 
TAGS: SNAR PGOV OTRA KCRM KJUS GG
SUBJECT: GEORGIA/ANTI-MONEY LAUNDERING PROSECUTION 
UNIT TAKES BILLION-DOLLAR CASE TO TRIAL AND PASSES 
POLYGRAPH TEST 
 
1.  Summary.  The DOJ supported anti money-laundering 
(M/L) unit of the Georgian Prosecutor's Office scored 
a first ever in Georgian jurisprudence by having a 
witness testify at trial pursuant to a plea bargain 
agreement. The case charges that the president of a 
local bank (and vice premier of Georgia in 1992) 
directed the laundering of a billion dollars through 
his bank. Further, in an affirmation of the eliteness 
of this unit and the confidence placed onto its 
members, 14 out of the 15 members passed a second 
(follow-up) polygraph test administered two weeks ago 
by a team of visiting FBI agents.  End Summary. 
 
Background 
---------- 
 
2. The Georgian Prosecutor's Office created a vetted 
unit last year to tackle high-level money laundering 
cases.  At that time, all unit members had to pass a 
polygraph administered by the FBI to gain entry into 
the unit. With USD 30,000 in INL funds, Post DOJ 
Resident Legal Advisor renovated and equipped a stand- 
alone office owned by the Prosecutor's Office in the 
old section of Tbilisi and conducted a series of 
intensive trainings in the investigation and 
prosecution of these types of cases. 
 
Gamma Bank Trial 
---------------- 
 
3. This expenditure of money, training, and effort has 
paid off.  To date the unit has initiated several 
significant investigations, each involving the 
laundering of millions of dollars received from banks 
in Russia. One of these, dubbed the "Gamma Bank" case, 
is currently in trial. Amiran Kadagishivili, the 
president of Gamma Bank, is in pre-trial detention and 
charged with receiving up to a billion dollars from a 
bank in Moscow over the past few years, and in turn 
wiring the received amounts to different banks in the 
US and elsewhere. Also, Gamma Bank was an authorized 
government collection agent for utility bills, notary 
fees, etc.  The bank collected a million dollars, 
which instead of being turned over the government, was 
wired to an account in Montenegro.  From there the 
money was transferred back into Georgia to shell 
accounts controlled by relatives of Kadagishivili. 
 
4. Although trial commenced in June, hearings have been 
held only sporadically, with a total of five held to 
date. At a recent hearing, a bank cashier who flipped 
pursuant to a plea bargain and pled guilty to 
conspiracy to money laundering, testified that 
Kadagishivili had ordered her to create false loan 
accounts through which to pass funds.  She was cross- 
examined by the defense counsel on the validity of her 
plea.  Refusing to backtrack on her position, she stood 
firm (despite tears) in her assertion of her own guilt 
and that of the defendant's. 
 
5. This hearing was quite significant as it showcased 
for the first time in Georgia the implementation of 
the trial techniques advocated by Post RLA and 
recently implemented into Georgian law; namely, use of 
a witness testifying pursuant to a plea bargain. The 
plea bargain provision was recently put into Georgian 
law upon recommendation by the RLA. The prosecutor 
handling this witness learned the technique at both a 
study tour sponsored by DOJ and a trial advocacy 
course taught by the RLA and visiting DOJ experts. 
 
Polygraph 
--------- 
 
6.  Two weeks ago all eleven members of the unit were 
administered polygraph tests by a team of visiting FBI 
agents.  Also, four M/L investigators from the 
Ministry of Internal Affairs were polygraphed.  Only 
one person (a prosecutor three months new to the M/L 
unit) registered deceptive on the question as to 
whether he/she had accepted bribes in connection with 
their work. By order of the Prosecutor General, this 
prosecutor was immediately dismissed from the unit. 
 
7.  Post hereby makes special mention of and offers 
its thanks to the four FBI Special Agents - Phillip 
Gadd, Unit Chief; Joseph Edwards from New Orleans, LA; 
Jeffrey Newton from Columbia, SC; and Michael Shafer 
from Lexington, KY - for their dedication, hard work, 
and professionalism. 
 
8. Comment.  That only one out of fifteen failed the 
polygraph is quite a significant testament to the 
dedication and professionalism of this unit. 
Considering the high money environment and the culture 
of temptation, this unit is a model for the rest of 
Georgian law enforcement to emulate. 
 
TEFFT 
1

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05TBILISI3200, GEORGIA’S FINANCIAL POLICE: THE IRS WITH GUNS?

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Reference ID Created Released Classification Origin
05TBILISI3200 2005-12-08 12:58 2011-08-30 01:44 UNCLASSIFIED Embassy Tbilisi

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 TBILISI 003200 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD EFIN EINV KCRM GG
SUBJECT: GEORGIA'S FINANCIAL POLICE: THE IRS WITH GUNS? 
 
1. Summary.  Recent business establishment closings by the 
Financial Police (FP) have prompted a renewed effort by local 
business and NGO leaders to encourage the Georgian Government 
to be transparent in their tax collection and enforcement 
efforts.  Many in the business and NGO communities contend 
that the closings are a method of revenue generation to meet 
monthly revenue targets.  The American Chamber of Commerce in 
Georgia (AmCham) is preparing a letter to the head of the 
financial police, David Kezurashvili, for co-signature by 
ambassadors, business, and NGO leaders in Georgia.  AmCham 
will request immediate action by the GoG to cease closing 
businesses prior to finding derogatory information in an 
audit.  End Summary. 
 
 
Financial Police Jurisdiction 
----------------------------- 
 
2. The FP calls itself a "special law enforcement unit" in 
the Ministry of Finance, mandated under Georgian legislation 
to investigate economic crimes.  The FP started its 
operations on March 15, 2004 and has 525 staff members. 
Since the day of its formation, the FP says some 8,500 crimes 
have been detected and prevented, and the amount paid to the 
budget has exceeded GEL 129 million.  Many business leaders 
complain that the FP operates outside its scope, ignores the 
rule of law, and is not transparent.  However, the 
Parliamentary law which established the FP is broad and 
vague, and the group's mandate and jurisdiction are still 
unclear. 
 
3. Press reports indicate that the FP have closed at least 60 
prominent restaurants in recent weeks.  To date, the FP has 
targeted food service, retail grocery outlets, and food 
import/export companies, including Nestle Georgia. 
Interestingly, these groups share a common thread of selling 
or buying imported food products.  In a few notable cases, 
the FP have arrived at businesses in black hoods, wielding 
automatic weapons and have forced the establishments' closure 
by confiscating records and computers necessary to day-to-day 
operations.  The Parliamentary law entitles the FP to "keep, 
carry and use official and other guns permitted under the 
relevant law."  It also authorizes the FP to use "physical 
coercion, special means and official and military arms when 
fulfilling job duties." 
 
AmCham: Keep businesses open during an audit 
-------------------------------------------- 
 
4. On December 5, Econoff attended an AmCham meeting 
dedicated to discussing the recent actions by the FP. 
Representatives from Transparency International, the European 
Union (EU), European Bank for Reconstruction and Development 
(EBRD) and local business leaders also attended the meeting. 
Many present expressed frustration at what they see as a 
pattern of abuse of power by those who should uphold the law. 
 All present acknowledge the need for all businesses to pay 
their share of taxes, and any dialogue with the GoG should 
emphasize that AmCham wants to work with the GoG to help 
businesses comply with the law.  But everyone also agreed 
that a tax evasion investigation should not begin with the 
closure of the business without evidence arising from a 
transparent audit.  The AmCham president, whose business the 
FP targeted last month and repeatedly investigated over the 
past 12 months, recommended that AmCham draft a letter to the 
head of the FP requesting that the FP immediately cease 
closing businesses prior to a tax evasion audit.  The letter 
will clearly support the GoG's desire to have all businesses 
pay fair taxes.  AmCham members said that the GoG touts 
Georgia's improving business and investment climate, but the 
current behavior of the FP makes it difficult for AmCham to 
market Georgia as an attractive place for investment. 
 
Challenges 
---------- 
 
5. At the AmCham meeting, members expressed frustration with 
what they see as a bias by the GoG and the majority of 
Georgians to view businesses as corrupt "cash cows" for the 
purpose of meeting revenue targets.  Georgia's cash-based 
economy makes it difficult to monitor corporate tax 
assessments.   It is unclear how the Ministry of Finance 
currently assesses corporate tax, but AmCham members 
expressed a willingness to work with the GoG to develop 
alternate methods. According to a US Treasury advisor to the 
Minister of Finance, the Ministry's tax department focuses on 
about 400 leading companies and squeezes them to meet the 
revenue targets.  Anecdotal information from local business 
leaders suggests that in several instances, following the 
complete closure by the FP, businesses and tax authorities 
reach arbitrary deals and compromises about the required tax 
based on a subjective evaluation of business activity.  This 
creates a fertile ground for bribe-taking. 
 
What we are doing 
----------------- 
 
6. The Embassy's Treasury, Customs, law enforcement and 
economic officers are also meeting with appropriate Ministry 
of Finance officials--including both the FP and Georgian 
Customs--to explore possible opportunities for technical 
assistance to the FP in how to better carry out their mandate 
and to underscore the need for fair and transparent 
implementation of Georgian law.  The
Ambassador is seeking a 
meeting with the Minister of Finance, Alex Alexishvili, to 
hold a follow-on discussion of our concerns.  The Ambassador 
decided to meet with Alexishvili to discuss this after he 
received a letter from Kezurashvili requesting assistance. 
TEFFT

Wikileaks

05TBILISI3199, PEACE PLAN FOR SOUTH-OSSETIAN CONFLICT RESOLUTION

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Reference ID Created Released Classification Origin
05TBILISI3199 2005-12-08 12:23 2011-08-30 01:44 CONFIDENTIAL Embassy Tbilisi

This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L TBILISI 003199 
 
SIPDIS 
 
 
E.O. 12958: DECL: 12/03/2015 
TAGS: PGOV PREL GG
SUBJECT: PEACE PLAN FOR SOUTH-OSSETIAN CONFLICT RESOLUTION 
 
Classified By: Ambassador John F. Tefft for reasons 1.4 (b) and (d) 
 
1. (C) In a November 30 meeting with Poloff, Deputy State 
Minister for Conflict Resolution Volski passed a copy of a 
non-paper on South Ossetia being prepared by the Ministry of 
Foreign Affairs.  The paper aims to demonstrate how the 
current peace plan is a logical outgrowth of President 
Saakashvili's presentation at the 2004 UN General Assembly. 
It notes the inability of the current Joint Control 
Commission (JCC) format to achieve resolution of the 
conflict.  (Note: To Poloff, Volski said Georgians want to 
broaden the JCC to strengthen it, not destroy it.  End note.) 
 The non-paper asks for U.S. support for: 
 
-- Georgia's ongoing democratic transformation. 
-- Georgia's territorial integrity and its role in regional 
security. 
-- The peace plan and its implementation including greater 
involvement of the U.S. and international community. 
-- In closing, it asks the U.S. to urge Russia to support the 
peace plan and cooperate constructively with Georgia. 
 
2.  (SBU) Begin Text: 
 
The Government of Georgia has developed a peace plan aiming 
at full-scale political settlement of South-Ossetian conflict 
in Georgia.  The end goal of this process is full 
reintegration of the region into Georgia.  The success of 
this process will create a model for resolving frozen 
conflicts and establishing lasting peace and stability in the 
Caucasus and the wider region.  For the last two years 
Georgia has already played the role of a model and helped 
advancing democracy in post-Soviet space. 
 
2.  (SBU) Georgian government has proved its commitment to 
the peaceful resolution of the conflict through its 
consistent steps taken in the course of this year: 
 
-- The main principles of Georgian vision of the conflict 
resolution were outlined by the President at the 
Parliamentary Assembly in Strasbourg on 26 January this year. 
 
-- The principles of the Strasbourg initiative were further 
developed during the international conference in Batumi on 10 
July setting the main priorities for the conflict resolution. 
 
-- In his speech at UNGA President of Georgia reaffirmed 
Georgia's commitment for the peaceful resolution and 
identified specific areas of the peace process: 
demilitarization and confidence building measures; economic, 
social rehabilitation of the region; full-scale political 
settlement based on determination of political status. 
 
-- On 27 October at the OSCE PC the Prime Minister of Georgia 
presented a comprehensive time-related Peace Plan providing 
specific measures and steps designed to accomplish the main 
objectives of the Georgian Government's peace initiative. 
 
3.  (SBU) The Georgian initiative is stimulated by the fact 
that the existing format is inadequate to the goal of 
conflict resolution and in reality serves as a tool for 
keeping the status quo of the frozen conflict.  Georgian 
Government believes that without full-scale settlement, the 
frozen conflicts represent a threat to stability, preclude 
social and economic development and cause continued human 
suffering. 
 
4.  (SBU) Success of the peace plan and overall peace process 
will be determined by more constructive involvement of the 
Russian Federation, greater role of the United States and 
European Union and more effective participation of OSCE and 
other international organizations. 
 
5.  (SBU) Georgia would like the U.S. to support: 
 
-- Ongoing democratic transformation in Georgia; 
-- Georgia's territorial integrity and its role for the 
regional stability; 
-- The Peace Plan and its implementation envisages greater 
involvement of the U.S. and international community. 
 
6.  (SBU) Georgia would like the U.S. to urge Russia to 
support the Peace Plan and cooperate constructively in 
Georgia. 
 
End text. 
 
TEFFT

Wikileaks

05TBILISI3198, TENSIONS RISING IN SOUTH OSSETIA

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Reference ID Created Released Classification Origin
05TBILISI3198 2005-12-08 05:39 2011-08-30 01:44 CONFIDENTIAL Embassy Tbilisi

This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L TBILISI 003198 
 
SIPDIS 
 
 
E.O. 12958: DECL: 12/09/2015 
TAGS: PREL PGOV GG
SUBJECT: TENSIONS RISING IN SOUTH OSSETIA 
 
Classified By: Ambassador John F. Tefft, for reasons 1.4 (b) and (d) 
 
1. (U) On December 2, the South Ossetian press reported that 
a checkpoint on the road to the Ossetian village of Zari was 
hit by fire from a grenade launcher.  Later press reports 
from South Ossetia claimed that Georgian special police 
forces attacked a bus traveling along a bypass road leading 
from Tskhinvali. No casualties were reported. 
 
2. (C) Poloff spoke with OSCE Political Officer Jurgen 
Schmidt, who said JPKF and OSCE observers determined that the 
reported explosion was the result of an accidental land mine 
detonation along a bypass road leading from Tskhinvali to the 
village of Java.  Schmidt said South Ossetians were spreading 
propaganda, there was no indication that an attack took 
place. 
TEFFT

Wikileaks

05TBILISI3194, COUNTERFEITING, ARRESTS, ABDUCTIONS IN SOUTH

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Reference ID Created Released Classification Origin
05TBILISI3194 2005-12-07 11:14 2011-08-30 01:44 CONFIDENTIAL Embassy Tbilisi

This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L TBILISI 003194 
 
SIPDIS 
 
 
E.O. 12958: DECL: 12/07/2015 
TAGS: PREL PGOV GG
SUBJECT: COUNTERFEITING, ARRESTS, ABDUCTIONS IN SOUTH 
OSSETIA 
 
REF: A. CATIPON - KASANOF EMAIL 
 
     B. DECEMBER 6 
     C. 2005 
 
Classified By: Classified By: DCM Mark X. Perry, for reasons 
1.4 (b) and (d) 
 
1. (C) Summary.  On December 5, the Georgian government 
orchestrated a sting operation against a counterfeiting 
operation in the breakaway region of South Ossetia, resulting 
in the wounding and arrest of an Ossetian law enforcement 
official allegedly involved in the illegal activity.  The 
operation, which was carried out by the Georgian Ministry of 
Defense inside the South Ossetian zone of conflict was met by 
reprisal arrests by South Ossetian officials of Georgian 
police and civilians, which themselves were met by further 
counter-reprisals against South Ossetians. Tensions have 
lessened following the release on December 7 of all those 
arrested by both sides, with the exception of the original 
South Ossetian individual accused of involvement in 
counterfeiting, who remains hospitalized in the Georgian city 
of Gori. An independent television crew appears to have been 
present during the December 5 sting operation. End Summary. 
 
 
--------------------------------------------- ------ 
Georgian sting operation nabs alleged counterfeiter 
--------------------------------------------- ------ 
 
2. (C)  On the night of December 5-6, Georgian Ministry of 
Defense Military Police performed a sting operation to arrest 
two South Ossetians believed to be involved in a large USD 
counterfeiting operation.  The incident took place near the 
village of Ergneti, within the zone of conflict. The 
Georgians shot and wounded (non-life threatening) Viacheslav 
Kudziev, Deputy Police Chief of the South Ossetian Village of 
Artseli.  According to press reports, Kudziev was carrying a 
large amount of counterfeit USD (Note: USSS Special Agent 
Jason Andrise, who is in Tbilisi to work on the 
counterfeiting case, confirmed the confiscation of $15,550 of 
fake notes. End note).  The other Ossetian escaped and 
Kudziev was taken to a hospital in Gori.  According to OSCE, 
Kudziev had participated in an OSCE-sponsored working group 
the week of November 30 in Gori, where the Georgian MoIA gave 
a verbal promise not to harass or target praticipants as a 
result of their participation in the working group. 
 
3. (C) According to news reports and OSCE contacts, the 
Georgian Military Police assaulted members of a Mzed 
television crew who were on the scene and had filmed the 
shoot-out between the Georgian and Ossetian sides. OSCE 
Security Officer Noah Lane said the TV crew was there filming 
a general report on South Ossetia when the incident happened. 
 Local witnesses told OSCE military observers that the MPs 
had "roughed up" the crew and confiscated their camera. 
 
--------------------------------------------- -------- 
Reciprocal abductions between Georgia, South Ossetia 
--------------------------------------------- -------- 
 
4. (U) On December 6, Georgian press reported that South 
Ossetian officials detained approximately twenty ethnic 
Georgians, including four policemen.  Georgian Minister of 
Interior Vano Merabishvili issued a statement calling on the 
South Ossetian authorities to release the "hostages".  Also 
on December 6, OSCE observers in Tskhinvali reported that at 
approximately 4:30 p.m. local time Georgian officials 
arrested or detained four Ossetian officials.  Merabishvili 
later denied Georgian involvement in the incident, saying 
that the Georgians were "ready to help Tskhinvali colleagues 
to collect information about the missing people." 
 
5. (C) On December 7, the DCM spoke with George Volski, 
Deputy Minister of Conflict Resolution, who said that all 
detainees on both the Georgian and South Ossetian side have 
been released.  Viacheslav Kudziev is still being held, under 
MoIA custody.  Volski said that his office has no answer as 
to why MoD rather than MoIA was involved in the sting 
operation. 
 
 
TEFFT

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