07TBILISI1446, Georgia Bi-Weekly Update June 15

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Reference ID Created Released Classification Origin
07TBILISI1446 2007-06-15 11:01 2011-08-30 01:44 UNCLASSIFIED Embassy Tbilisi

DE RUEHSI #1446/01 1661101
R 151101Z JUN 07

E.O 12958: N/A 
SUBJECT: Georgia Bi-Weekly Update June 15 
1. This cable contains current items of political, economic, and 
social interest concerning Georgia during the weeks of June 2-15. 
Meeting of Georgian and Russian Presidents 
2. Georgian President Saakashvili and Russian President Putin had a 
50-minute meeting in St. Petersburg on June 9, which has produced 
considerable public commentary -- most of it favorable -- in 
Georgia.  Following the meeting, Saaskashvili was quoted as saying 
relations between the two countries should be not merely normal but 
"most friendly."  The two presidents agreed to instruct their MFAs 
on joint work aimed at stabilizing bilateral relations.  Georgian 
Foreign Minister Bezhuashvili commented that the meeting was 
"forthright, important and principled," and stressed that Georgia's 
Euro-Atlantic path could not be questioned.  Parliament Speaker 
Burjanadze emphasized the importance of such face-to-face meetings 
given the two countries' complicated relations. 
Minister's Gifts Confiscated in Azerbaijan 
3. On June 9, Georgian Minister of Education Kakha Lomaia visited 
the ethnic Georgian village of Aliabed in Azerbaijan, where he met 
with schoolchildren, presented them with Georgian textbooks and 
literature, and spoke about a program to help them enroll in 
Georgian universities.  According to reports covered extensively in 
Georgian media, local security forces barred many students from 
attending the meeting, and confiscated books from and even assaulted 
those who did attend.  TV cameras captured images of children crying 
and Lomaia arguing with a local official.  Lomaia himself has not 
made any official comment so far, but a Parliamentary committee 
intends to write a letter to Azerbaijani Parliament requesting an 
investigation of the incident.  Georgian commentators have used the 
episode to criticize the government's friendly policy toward 
Azerbaijan, with one newspaper declaring that "apparently for 
Georgian authorities gas and other goodies from Baku are more 
important that the rights of their compatriots." 
Repatriation of Meskhetian Turks? 
4. On June 13, the parliamentary foreign affairs committee held a 
hearing of a draft law on repatriation of the Meskhetian Turks, 
deported from Georgia by Stalin in 1944.   Georgia has an 
outstanding commitment to the Council of Europe, made in 1999, to 
complete repatriation by 2011.  The Meskhetian Turks, who are now 
living in Russia and Central Asia, have long pushed to return to 
their homeland in Georgia, but this prospect has caused fear among 
ethnic Armenians in Georgia over potential land and property 
disputes, demographic shifts, and the emergence of a "Turkish" 
presence in their territory.  Many ethnic Georgians are also 
resistant to repatriation.  On June 13, parliamentary discussion of 
the issue grew into a noisy clash between majority and opposition 
MPs, with the latter arguing that resettlement in Georgia would 
distort the country's demographic balance and exacerbate social and 
ethnic problems (Note: The majority ethnic-Armenian population of 
Javakheti, origin of the Meskhetian Turks, does not want them to be 
repatriated here. End note). 
Working Group on "Products from the Conflict Zone" 
--------------------------------------------- ----- 
5. In a June 4 meeting with international, NGO, and Georgian 
government representatives, the Parliamentary Commission on 
Territorial Integrity discussed plans for developing the "Product 
from the Conflict Zone" project, designed to encourage manufacturing 
in the South Ossetia conflict zone.  This was the first meeting of 
the economic working group for the project, which will convene on a 
regular basis to hear reports of experts.  The working group's 
conclusions and recommendations will be submitted to the Commission 
which in turn will work with the executive branch of government to 
implement them. 
Another Wave of Tariff and Price Increases 
6. One of Georgia's landline telephone operators -- United Telecom 
(UT) -- has doubled the tariff on local calls. Telephone calls will 
cost GEL 0.04 (roughly USD 0.02) instead of GEL 0.02 per minute 
starting June 1.  There will be no charge for calls between two 
subscribers of the network, but because UT is only one part of the 
landline market the increase will be felt by most telecom customers. 
 Separately, the Tbilisi Water Supply Company has announced a change 
in the way it will calculate water consumption costs, replacing a 
fixed rate with water meters, a change that analysts believe will 
result in higher bills.  These increases affect a population already 
hit by increased gasoline prices, which have led to higher tariffs 
for public transportation. 
Arab Investor Buys Sheraton 
7. On Jun
e 8, the Sheraton Metechi Palace Hotel was sold at auction 
for USD 67.5 million to Rakeen Development, a company based in Ras 
Al Khaimah, United Arab Emirates. Rakeen beat out bidders from 
TBILISI 00001446  002 OF 002 
Georgia, Greece, Israel, India, and the UK.  Rakeen is reportedly 
planning to invest USD 1.5 billion in Georgia, including in a 
potential free economic zone in Poti, and the company recently 
purchased land in Tabakhmela, near Tbilisi, to build a recreational 
project with a golf course.  The Sheraton Metechi Palace was built 
in the late 1980s as a joint venture between the Tbilisi 
municipality (85 percent) and an Austrian investor (15 percent). 
The Georgian government assumed control in 1996 after the joint 
venture failed to repay its debt to an Austrian bank.  In 2007, the 
Ministry of Finance initiated a bankruptcy procedure to sell the 
joint venture's property, the total debt of which had reached 103 
million euros. 
National Bank Diversifies Its Holdings 
8. On May 31, 2007, the National Bank of Georgia (NBG) initiated its 
first-ever move toward diversification of foreign exchange assets 
into longer-term holdings, and this move was into the U.S. market. 
The NBG became an instrument of finance for the U.S. government and 
its budget deficit, with the NBG's foreign reserves now invested in 
U.S. Treasury securities.  The NBG's foreign assets recently passed 
the USD 1 billion mark, a significant volume for a country of 
Georgia's size, and the U.S Treasury Advisor is encouraging the NBG 
to improve income from these assets by expanding into the U.S. and 
other markets, including Euro-denominated securities of EU states. 
In the near future, the earnings from foreign exchange assets will 
be the primary source of the NBG's income. 
Apostille Certification in Force 
9. Starting May 14, 2007, Georgia is a party to the 1961 
international convention that abolishes the requirement for 
"legalization of public documents" from one country for use in 
another country.  Under the convention, foreign companies operating 
in Georgia will be able to use the simpler "Apostille Certificate" 
instead of going through the legalization procedure.  This change 
will make it easier for foreign companies to register in Georgia, 
and will significantly shorten the time needed for U.S. exporters to 
collect documents required for participation in Georgian government 
procurement tenders. 
USDA Trade Mission to Georgia 
10. The U.S. Department of Agriculture (USDA) sponsored a Trade and 
Investment Mission (TIM) to Georgia on June 11-15.  The TIM's 
purpose was to promote trade and investment in various 
agriculture-related fields including, but not limited to, advanced 
plant genetics, processing equipment, cattle genetics, beverages and 
ready-to-eat products.  The Tbilisi Business Service Center (TBSC) 
and the American Chamber of Commerce in Georgia organized one-on-one 
meetings and site visits for 11 American companies with Georgian 
companies in agribusiness sector, and presentations by top officials 
in the agricultural field. 


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