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Reference ID Created Released Classification Origin
06TBILISI3069 2006-11-22 15:32 2011-08-30 01:44 CONFIDENTIAL Embassy Tbilisi

DE RUEHSI #3069/01 3261532
O 221532Z NOV 06

C O N F I D E N T I A L SECTION 01 OF 07 TBILISI 003069 
E.O. 12958: DECL: 11/22/2016 
Classified By: AMBASSADOR JOHN F. TEFFT.  REASONS:  1.4 (B) AND (D). 
1. (C) Summary:  The Saakashvili administration came to power 
after the 2003 Rose Revolution promising to build 
democracy, increase prosperity, and reincorporate Georgia's 
separatist regions.  Three years after the Rose Revolution, 
the Saakashvili administration has much to be proud of.  In 
place of a nearly-failed state, the GOG has built a 
cohesive nation with maturing democratic institutions, a 
growing and diversifying economy, and a comprehensive 
reform program that has been cited by the World Bank and 
other international organizations for its success in 
fighting corruption and improving the environment for 
investment.  The GOG successfully re-integrated the Adjara 
region in 2004.  Russian bases that have existed in Georgia 
for over 200 years are being withdrawn and NATO, citing 
reform progress has given Georgia Intensified Dialogue (ID), 
bringing the country one step closer to its strategic 
objective of membership in the Alliance.  Serious challenges 
remain including consolidating difficult reforms 
as major economic and political pressure from Russia 
threatens to undermine them.  The pressure comes in the 
form of economic bans on Georgian goods, the complete cutoff 
of all transport and communication links with 
Georgia, support to the separatist regions, and alleged 
covert activities designed to undermine the Saakashvili 
government.  Achieving Georgia's strategic goals and 
fulfilling the promise of the Rose Revolution, will require 
continued political commitment to difficult reforms and 
patience in the face of escalating pressure and 
provocations from Russia.  It will also require continued 
help from the U.S. and Europe to keep the GOG on the right 
path and to act as a check on Russian misbehavior.  End 
2. (SBU) The decentralization of power from Tbilisi to the 
regions has been a major achievement for the Saakashvili 
government.  With strong USG political and assistance 
support, laws passed in 2005 and 2006 established viable 
and accountable local governments that are elected by and 
directly accountable to their constituents.  In May 2006, 
Parliament passed budget legislation that clearly defines a 
formula by which money is distributed from Tbilisi to local 
authorities.  Power of the purse will strengthen the hand of 
local administrators and give them the ability to better 
address their constituents' concerns.  Although the GOG has 
passed good legislation, implementation will be the true 
test.  Mission will continue to urge central authorities to 
refrain from interfering with nascent local governments and 
USG assistance will help newly-elected local officials to 
develop their technical capacity. 
3. (U) One of the most difficult challenges to tackle has 
been dismantling the corrupt Soviet era judiciary.  Since 
the Rose Revolution, the GOG has implemented a number of 
measures to reform the judicial system including 
consolidating a previously sprawling and inefficient court 
system into a straightforward three tier system of trial 
courts, Appeals Courts and Supreme Court.  Corrupt and 
incompetent judges were removed from the bench and replaced 
with appointees drawn from a pool of candidates who had 
passed an objective written examination. Other efforts to 
promote judicial independence including granting contempt 
powers to judges to impose fines or confine anyone who 
disrupts court proceedings and introducing court 
marshals/bailiffs to provide security and maintain order in 
courthouses and during court proceedings. 
4. (SBU) During 2006, at our urging, President Saakashvili 
acknowledged the need to hasten judicial reform.  Court 
salaries were increased for the first time since 1998 thus 
reducing the incentive for corruption.  In April, the 
composition of the High Council of Justice (HCOJ), the 
disciplinary body of the court system, was changed to 
remove the Prosecutor General and to increase the number of 
judicial members elected by their peers so as to constitute a 
majority on the HCOJ.  The High School of Justice was also 
established as a judicial training center where 
starting in 2008, all newly appointed judges will undergo 14 
months of training prior to assuming their place on the 
bench.  Pursuant to the constitutional amendments proposed by 
the President in October, the President will no longer 
have the unilateral power to appoint or dismiss judges.  That 
TBILISI 00003069  002 OF 007 
power will rest with the HCOJ whose nominees to the 
bench would be approved by Parliament.  The President, 
however, will remain chair of the HCOJ but a non-voting 
5. (U) Other complementary reforms have been implemented to 
improve the legal profession and the effectiveness of the 
administration of justice.  A program of intense training and 
a new code of conduct have been implemented within the 
osecutor General's Office.   The Legal Committee in 
Parliament is working on legislation to ban ex parte 
communications, an unfortunate legacy of Soviet-era 
'telephone justice, legal systems.  A newly reconstituted 
bar association has drafted a code of ethics and introduced a 
new disciplinary system.  A new objective bar exam for 
attorneys has replaced its corruption-ridden predecessor. 
Access to affordable legal services, however, continues to 
be a concern.  Most defendants in criminal cases proceed 
without benefit of counsel. 
6. (U) Education reform has been one of the most successful 
areas of progress made by the GOG.  Two important laws were 
passed in 2005: the Law on General Education and the Law on 
Higher Education.  The Law on General Education reorganized 
the Ministry of Education's standards for teaching, 
curricula, textbooks and testing.  By establishing a new 
system of school governance involving boards of trustees, 
teachers' councils, and parents' consultative bodies, the 
Law has made secondary schools more independent from the 
Ministry of Education and more accountable to local 
families.  The elections of school boards were widely 
attended by the public underlining Georgian support for 
this reform.  The Law on Higher Education created 
accreditation standards for universities to meet: in 2006, 
32 Universities obtained this accreditation.  It also 
provided for uniform entrance exams, making predictable and 
transparent a previously and often corrupt process. 
University reorganization has made many institutes of 
higher education financially independent from the Ministry of 
7. (U) In 2006 the Ministry opened 17 Education Resource 
Centers, making the control of local education bodies the 
responsibility of publicly competitive positions.  The 
Ministry of Education's ongoing efforts to extend inclusive 
education and vocational training programs are also a major 
focus for the GOG: 12 rehabilitated and modernized 
technical education centers were opened in 2006.  Further 
steps are required to ease University faculty members into 
a system of openly competitive academic positions, and to 
fully implement the policies outlined in the two major 
Education laws, for example expanding the GOG plans to give 
each school in Georgia a board of education, board of 
trustees, student council, and pedagogical council to empower 
local stakeholders and guarantee qualified and 
consistent education standards. 
8. (U) The fight against corruption has been a major area of 
focus for the Saakashvili government and a major area of 
assistance for USG programs.  GOG initiatives including the 
prosecution of corrupt officials and businessmen including 
those from the ruling party, along with continuing 
deregulation and tax and customs reform supported by USG 
technical assistance and programming have created a more 
transparent business climate with less opportunity for 
corruption in government institutions.  The World Bank hails 
Georgia as the top reformer in its 2006 
Anti-corruption in Transition report, the Millennium 
Challenge Corporation's 2007 indicators shows Georgia 
scores above its peer group on anti-corruption efforts, and 
in an April 2006 International Republican Institute poll, 
96 percent of those surveyed said that they had not had to 
pay a bribe to receive a public service in the last 12 
months.  Georgia has also significantly improved in 
Transparency International Corruption Perception Index, 
moving from 130th place to 99th from 2005 to 2006. 
9. (SBU) Similarly, a 2006 World Bank/EBRD survey states that 
the percentage of firms that identified corruption as a 
significant obstacle fell from 60% in 2002 to 39% in 2005 and 
the percentage of firms that paid bribes during the 
same period fell from 44% to 11%.  Increased compliance with 
financial structures, improved implementation, and 
TBILISI 00003069  003 OF 007 
more participation in the formal economy have significantly 
increased public trust in the Government and increased the 
size of the national treasury five-fold.  The USG will 
continue to push the GOG to fulfill the steps outlined in 
its 2006 Anti-Corruption Action Plan in order to consolidate 
gains made in the last three years. 
10. (U) Nation-wide local elections were held on October 5 in 
which ruling party National Movement notched a big 
nationwide victory capturing over 70% of the votes throughout 
Georgia.  The Organization for Security and 
Cooperation in Europe /Office for Democratic Institutions and 
Human Rights (OSCE/ODIHR) concluded that the elections 
were conducted with general respect for fundamental freedoms. 
 In a post-election statement, ODIHR praised the 
Central Election Commission (CEC) for its "commendable 
efforts" to improve the quality of the voters, list and the 
"professional and inclusive manner" in which the election was 
conducted.  In the October 2005 Parliamentary 
by-elections, observers had noted problems with the voters, 
list and had recommended that the CEC to take steps to 
address this concern.  USAID-funded local NGOs International 
Society for Free and Fair Elections (ISFED) 
and new Generation new Initiative (nGnI) concluded that the 
October 5 local elections were fundamentally fair and the 
results represented the will of the electorate.  ODIHR, ISFED 
and nGnI recommended that the CEC continue its 
efforts to improve the voters, list in the run-up to the 
Fall 2008 Parliamentary and Presidential elections.  USAID 
in conjunction with OSCE is funding a civil registry project 
which will computerize all civil records in 
Georgia.  This multi-year project will ultimately fix the 
voters list.  In the meantime, USAID is funding a program 
to help the CEC implement some of the changes recommended by 
11. (U) Changes to the Criminal Procedure Code have increased 
the protections provided to the accused.  By 
requiring that a defendant confirm to a judge any statements 
given in pre-trial detention before it can 
be introduced as evidence, the incentive for investigators to 
coerce a confession was reduced.  Bail is now the 
legislatively mandated preferred force of pre-trial restraint 
in instances where the accused does not pose a 
threat.  As a result over 50% of arrestees are currently 
released on bail as opposed to less than 10% in 2005. 
12. (U) Despite the increased use of bail and the opening of 
new and remodeled facilities, however, conditions in 
pre-trial detention facilities as well as post-conviction 
prisons generally remained poor.  The International 
Committee of the Red Cross, the OSCE, and many NGOs including 
Human R
ights Watch report inhumane and 
life-threatening conditions compounded by overcrowding and 
inadequate nutrition and health care.  The Ministry of 
Justice, which oversees the penitentiary system, announced 
that as a result of increased budgetary commitment, by 
2008, all inmates in Georgia will be housed in newly 
constructed or completely renovated facilities that meet 
international standards.  At present, approximately 4,000 of 
Georgia's 14,000 inmates are housed in the new 
facilities financed by the European Union.  Expected 
improvements in prison conditions as a result of increased 
budgetary allotments may be unrealistic as a result of the 
increase in prisoners following the GOG's crackdown on 
crime.  While the inmate population has grown 56 percent from 
the end of 2005 to mid-October 2006, the per inmate 
budget allocation has only increased 19 percent in that same 
13. (SBU) The Saakashvili administration famously fired 
15,000 police officers in 2004 and with strong USG 
assistance, hired and trained a new force in an effort to 
clean up this corrupt and ineffectual institution.  In an 
April 2006 poll, the police had an over 70 percent approval 
rating according to the International Republican Institute 
-- a figure unheard of in the former Soviet Union.  The 
Ministry of Internal Affairs (MOIA) has done much to 
improve equipment, provide for operating funds, and build or 
TBILISI 00003069  004 OF 007 
upgrade new facilities.  The USG will continue to push 
the GOG to expand on this success by targeting structural 
reform in the MOIA. 
14. (U) The status of religious freedom continues to improve 
through increased government responsiveness to the 
needs of minority groups as well as investigation and 
prosecution of harassers of nontraditional faiths. The GOG 
has also implemented a registration process for religious 
groups that grants them legal status, for example, to buy 
or sell property.  Previously, no registration process 
existed yet non-registered groups were subject to fines and 
other administrative penalties. 
15. (SBU) The government has taken significant steps to 
combat trafficking in persons (TIP) including the passage 
of a new anti-TIP law that went into effect in July 2006, the 
formation of a permanent inter-agency anti-TIP 
government commission, and the development of a government 
fund that will provide assistance to TIP victims which was 
approved by the inter-agency council in November.  In June, 
the President signed the Law on Elimination of Domestic 
Violence which when implemented in 2007 will allow victims 
for the first to file for immediate protective orders 
against their abusers thus giving them more practical 
recourse than pressing criminal charges.  The GOG has 
committed to taking over the financing and administration of 
a shelter built with USAID assistance in Adjara and has 
acquired another building which it plans to develop as a 
shelter in Tbilisi.  Mission will continue to press the GOG 
to fight for increased prosecutions and tough sentences for 
traffickers that match the heinous nature of their crimes. 
16. (U) Since the Rose Revolution, the Saakashvili government 
has committed itself to observing 
internationally recognized human rights.  Throughout 2005 and 
2006, there were several cases of police officers 
brought to trial, dismissed, or demoted for abuses.  In July 
2006, four Ministry of Internal Affairs officers were 
convicted and sentenced to seven years in the beating death 
of Sandro Girgvliani.  In August, a police officer was 
sentenced to four years in the shooting death of Amiran 
Robakidze.  The level of abuse committed in police stations 
declined sharply after a program of monitoring was introduced 
in 2005.  Despite these positive developments, 
however, NGOs note that close ties between prosecutors and 
police and the lack of professionalism and independence of 
the judiciary hinders systematic investigation, prosecution 
and punishment of abusers, especially outside of Tbilisi. 
Moreover, NGOs note that an aggressive "zero tolerance" for 
crime policy which they claim violates the presumption of 
innocence, resulted in an increase in the number of deaths 
during police operations earlier in 2006, though they 
acknowledge this situation has improved as the year 
17. (SBU) With unofficial unemployment at 50%, the 
Saakashvili government has made job creation and improving 
the climate for foreign and domestic investment in Georgia 
top priorities.  The progress made has been recognized by 
the World Bank in its Doing Business 2007 study, which 
compares the ease of opening, conducting and closing a 
business in 175 countries. Georgia vaulted from 112th on the 
World Bank's list to 37, making it the fastest 
reforming economy in the world.  The government has lowered 
taxes, reduced the number of required licenses, 
strengthened and harmonized standards, reduced state 
regulation, cut tariffs, and simplified customs 
procedures.  The government privatized almost nine times the 
value of assets in 2005 as it did in all of 2000-2003. 
The government hopes to attract as much as a billion dollars 
in foreign investment in 2006, even after the 
Baku-Tbilisi-Ceyhan (BTC) oil pipeline construction has been 
completed.  Although stiffer enforcement has increased 
tax revenues since the Revolution, reports of ham-handed 
TBILISI 00003069  005 OF 007 
tactics by the Financial Police remain common, sowing 
uncertainty among businesses.  Mission has proposed 
significant reforms to the GOG that will alleviate problems 
associated with the Financial Police. 
18. (SBU) Macroeconomic management has so far been adequate. 
The economy continued to show strong real growth through 
2005, reaching 9.3% year on year in 2005.  The Russian bans 
On Georgian exports, the severing of transport links and 
major increases in energy costs however, may limit growth by 
1-3%, according to the IMF.  The IMF adds that the 
longer the blockade is in place - the worse the damage will 
be.  The economy could still grow as much as 6-7% in 2006. 
Inflation has been relatively moderate for such a 
fast-growing economy, at 8% in 2005, but it is trending up 
as a result of a quickly expanding money supply, higher 
costs, and more vigorous government spending permitted by 
growing tax revenues. 
19. (SBU) Georgia's energy supply picture is much improved 
since the Rose Revolution. From 1998 to 2004, USAID 
provided $47.3 million in cash subsidies to needy
for energy.   Last winter was the first the time Georgia 
took this burden on itself.  With USG assistance, electricity 
supplies have become more reliable, approaching 
consistent 24-hour-a-day service through improved management, 
systems and anti-corruption efforts. 
Hydropower output has increased almost 27%, and thermal by 
28%, from 2005 to 2006.  Georgia is even beginning to 
export electricity to its neighbors.  Natural gas supplies, 
especially this winter, are more problematic.  Russia 
quadrupled the cost of gas in two years, interfered with 
Georgia's efforts to contract with Azerbaijan for 
alternative supplies, and threatened outright cutoffs to 
Georgia.  Nevertheless, with more gas becoming available to 
Georgia via the Shah Deniz pipeline from Azerbaijan, and 
increased reliance on domestic hydroelectric power, the GOG 
expects that the situation will significantly improve after 
2008.  The GOG has asked for USG support as they work with 
Azerbaijan and Turkey to strengthen their energy situation in 
the short-term. 
20. (C) The Saakashvili has identified NATO integration as a 
top national strategic objective.  NATO's decision to 
give Georgia Intensified Dialogue in September was a major 
success for Saakashvili and was a strong acknowledgment 
from the West of GOG progress in political, economic, and 
defense reforms.  The GOG needs to target judicial reform, 
rule of law, and structural reform at the MOD while remaining 
calm in the face of Russian provocations. 
21. (C) Georgia continues to make progress on defense reform. 
 Significant progress in meeting Individual 
Partnership Action Plan (IPAP) goals was noted during the 
NATO International Staff (IS) assessment last 
spring, but the challenge for the Ministry of Defense now is 
to implement into operational practice many of the plans 
and programs that have been successfully developed thus far. 
A key shortcoming noted during the assessment was in 
the field of Personnel Management, but several initiatives to 
progress in this area were made this fall. 
22. (C) The next two key challenges for the Ministry of 
Defense will be to demonstrate continued progress in 
implementing IPAP objectives during the forthcoming Spring 
2007 NATO IS assessment, and in completing and publishing 
the ongoing Strategic Defense Review (SDR) in July 2007, 
Georgia's stated goal.  Deciding on a stable force 
structure that can be properly resourced into the future will 
be key to completing the SDR. 
23. (SBU) On May 30, 2005, the Russian and Georgian Foreign 
Ministers signed a Joint Statement agreeing to a timeline 
for the withdrawal of Russian military forces from its bases 
in Batumi and Akhalkalaki by October 1, 2007.  Russia 
TBILISI 00003069  006 OF 007 
fulfilled the 2005 provision of the Joint Statement calling 
for the removal of 40 armored vehicles, including 20 tanks, 
by the end of October 2005 (slightly behind schedule because 
of weather delays).  Russia fulfilled its 2006 
withdrawal requirements ahead of schedule, removing all 
remaining heavy equipment from Akhalkalaki, as well as 
equipment and ammunition from Batumi, by mid-September 2006. 
 All remaining Russian military forces and equipment 
in Akhalkalaki and Batumi are on schedule to be removed from 
Georgia by October 1, 2007.  The status of the Russian 
base at Gudauta, in Abkhazia, which the Russians agreed to 
close at the 1999 OSCE Istanbul Summit, remains 
unresolved.  The base has not been transferred to Georgia, 
and Russian troops remain at the base as peacekeepers. 
24. (C) From the beginning of his presidency, Saakashvili has 
made it clear that he wants the reunification of 
Georgia to be part of his historical legacy.  His active 
approach has produced some impressive successes, bringing 
Adjara and the Upper Kodori Gorge back under Georgian 
government control.  But the hardest nuts -- Abkhazia and 
South Ossetia -- remain uncracked.  Over the past year, 
Russian support for the separatist regimes has become, if 
anything, even more unyielding and overt, making it hard to 
predict a breakthrough in the near future.  Even so, the 
Georgian government's approach has over time become steadier 
and smarter, as evidenced by the contrast between 
the government's poorly coordinated behavior during the 
violence in South Ossetia in 2004 and the well-run Kodori 
operation in July 2006. 
25. (C) Since Kodori, the government has shown notable signs 
of improved internal coordination and, under the 
influence of Foreign Minister Gela Bezhuashvili, of 
recognizing the importance of getting its side of the story 
out to the international community.  The government wisely 
moved to get behind the donors' economic rehabilitation 
projects in South Ossetia, despite some qualms that these 
could benefit the de facto Kokoity regime.  It has also put 
on hold the idea of unilaterally terminating the mandate of 
Russian-led peacekeepers in both conflicts. 
26. At the same time, however, the government has rejected 
suggestions -- such as a statement on non-use of force or 
abandonment of its push to change negotiating and 
peacekeeping formats -- that it believes would signal 
weakness to the separatists and the Russians.  The 
government's position is tough, but not unthinkingly so, 
and this approach appears to have the broad support of the 
Georgian public.  If anything, any potential opposition is 
likely to come from those -- like former Defense Minister 
Okruashvili -- who would push for a harder line. 
Saakashvili has told us that he believes time is on Georgia's 
side in the conflicts:  Georgia's economic 
development will over time draw the separatist regions back 
toward Georgia, and an outbreak of major violence would 
undercut this favorable long-term dynamic. 
27. (C) Georgia's reforms have come in the face of an 
increasingly aggressive Russian policy that many Georgians 
believe is designed to thwart the reforms and to produce 
"regime change" in Georgia.  Between December 2005 and May 
2006, Russia imposed bans on imports of Georgian agricultural 
products, wine, cognac, sparkling wines, and 
mineral water, all products for which Russia had previously 
been Georgia's primary market.  Russia has also closed the 
only legal land border between the two countries, and severed 
all air, rail, and sea transportation links. 
28. (C) Following the Russia-Georgia spying
 confrontation in 
September-October 2006, Russian officials conducted a 
highly publicized campaign of harassment and deportation of 
Georgian citizens in Russia, many of whom had been sending 
remittances to Georgia for years.  Many Georgians expect 
Russia to disrupt gas supplies this winter, as happened 
last year.  All these steps have hurt the Georgian economy, 
but they do not seem to have undermined support for the 
government; if anything they have done the opposite, as 
evidenced by the National Movement's huge wins in October 
local elections. 
29. (C) With few exceptions, the opposition has supported the 
government's handling of relations with Russia and its 
TBILISI 00003069  007 OF 007 
NATO aspirations.  This level of support appears to give the 
government the time it needs to see Georgia through to 
a more diversified economy in which Russia holds much less 
economic leverage.  As Georgia becomes more closely and 
irreversibly integrated with NATO, we may eventually see a 
lessening of Russian military and political pressure, but 
in the interim as Georgia moves from Intensified Dialogue to 
a possible Membership Action Plan (MAP) this pressure 
seems likely to become even more intense. 
30. (C) Comment: The GOG has made tremendous progress but it 
faces a hard road ahead.  Following an overwhelming 
victory in the October local elections the Saakashvili has 
targeted 2007 as a year for continuing its difficult reform 
program in order to consolidate gains ahead of the 2008 
Parliamentary and Presidential elections.  Escalating 
Russian pressure however, is designed to derail the GOG's 
reform program and efforts to integrate with NATO, and 
Saakashvili is counting on U.S. and European support as a 
counterweight to its great northern neighbor.  The U.S. and 
Europe need to speak with one voice on the need for Russia to 
cease its economic blockade and continued obstruction to 
the peaceful resolution of the separatist conflicts.  The 
dreams of the Rose Revolution, inspired by western ideals and 
values, remain very much alive.  Continued success will 
require Georgian steadfastness as well as continued western 
support if the goal of rebuilding Georgia into a democratic, 
prosperous and unified country is to be achieved.  End 


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