07TBILISI2797, GEORGIA BI-WEEKLY UPDATE NOVEMBER 9

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Reference ID Created Released Classification Origin
07TBILISI2797 2007-11-09 12:54 2011-08-30 01:44 UNCLASSIFIED Embassy Tbilisi

VZCZCXRO2897
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSI #2797/01 3131254
ZNR UUUUU ZZH
R 091254Z NOV 07
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC 8158
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 TBILISI 002797 
 
SIPDIS 
 
SIPDIS 
 
E.O 12958: N/A 
TAGS: PREL PGOV PHUM ECON GG
SUBJECT: GEORGIA BI-WEEKLY UPDATE NOVEMBER 9 
 
 
1. This cable contains current items of political, 
economic, and social interest concerning Georgia during the 
weeks of October 27-November 9. 
 
Georgia Claims Violation of Airspace 
------------------------------------ 
2. Zaza Gogava, Head of Georgia's Joint Forces Command, was quoted 
November 4 saying that Russian aircraft had violated Georgia's 
airspace on November 2.  Reportedly three SU-24 aircraft flew 3 
kilometers into Georgia's territory for one minute in the vicinity 
of Stepantsminda.  Russian military officials denied the accusation. 
 According to Interfax news, Russian Air Force spokesman Alexander 
Drobyshevsky stated that two aircraft and two helicopters were 
flying as a military convoy operating in the region, but they were 
100 kilometers away from the Georgian border.  "All flights by 
Russian aircraft within the framework of the Caucasian Frontier 2007 
exercise are controlled, given the situation in Georgia and given 
the fact that Georgia could make such statements," Drobyshvesky 
said.  No further information was available from the Georgian 
Ministry of Defense. 
 
NATO Week in Georgia 
-------------------- 
3. From October 29 to November 3, Georgia hosted its first NATO 
Week, a series of informational events on Georgia's relationship 
with NATO.  State Minister for European and Euro-Atlantic 
Integration Giorgi Baramidze and Deputy Defense Minister Batu 
Kutelia launched the events, and afterwards Ambassador David Smith, 
Diplomatic Advisor to the Center, said the week had achieved its aim 
of generating public attention.   In addition to Tbilisi, NATO Week 
was also celebrated in Upper Abkhazia and Ajara.  The week was 
concluded by a gala concert at the Tbilisi stadium, attended by 
students from Tbilisi and the regions, as well as army reservists 
brought to Tbilisi for the event.  Though planned much earlier, the 
concert coincided with a large opposition demonstration in Tbilisi, 
and the concert took on the character of a pro-government rally, 
counterbalancing the protest. 
 
International VIPs Visit Georgia 
-------------------------------- 
4. The Georgian government and the German Marshall Fund hosted the 
"Tbilisi Summit: Building Europe's East," starting on November 1. 
Representatives of 25 countries attended the event, which included a 
visit to the newly reconstructed town of Sighnaghi in Kakheti 
region.  The forum focused on energy security, the EU Neighborhood 
Policy, and conflict resolution issues.  Some of the high-ranking 
participants were Swedish Foreign Minister Carl Bildt, U.S. 
Assistant Secretary of State Daniel Fried, Lithuanian Deputy Foreign 
Minister Yaroslav Neverovich, Council of Europe Secretary General 
Terry Davis, and OSCE Secretary General Marc de Brichambaut.  Guests 
visited Ajara and the South Ossetian village of Kheiti, where they 
met with Dmitry Sanakoyev, Head of the Temporary Administrative Unit 
of South Ossetia. 
 
Protest against Patarkatsishvili in Ureki 
----------------------------------------- 
5. On October 30, a protest took place in the Black Sea resort town 
of Ureki, initiated by the local office of the ruling National 
Movement and members of the local municipal council.  The protest 
was aimed against opposition financier Badri Patarkatsishvili, who 
is the owner of properties in the town that include a health and 
recreation complex, hotels, children's playgrounds, and various 
stores.  Protesters targeted Patarkatsishvili's private residence in 
the town, which includes a restricted area on the beach.  Ruling 
party MP K. Beridze attempted to energize the crowd by declaring 
that Patarkatsishsvili wishes to buy all of Georgia and put a fence 
around it, but nobody is going to let him do so.  According to an 
Embassy source, however, when local residents recruited for the 
protest realized it was targeted against Patarkatsishvili, many 
switched sides and began protesting against the protest.  These 
residents said that Ureki, largely ignored for years, had improved 
and become a center for tourism due to Patarkatsishvili's efforts. 
 
Swiss Bidder Wins Tender for Water Systems 
------------------------------------------ 
6. On October 27 the Ministry of Economic Development of Georgia 
(MoED) announced that Multiplex Solutions AG had won the 
privatization tender for a package of assets including the water 
supply and distribution company for Tbilisi - "Tbilisi Water," the 
Mtskheta water supply system, Gardabani sewage system, and Zhinvali 
hydro power plant and water reservoir.  Multiplex is registered in 
Switzerland, but its ownership is not publicly available 
information, nor has the GOG released any information on its 
background.  Multiplex will pay about USD 85.7 million, invest USD 
350 million in rehabilitation of the water distribution network, and 
maintain the current fixed tariff of GEL 2.4 (about USD 1.5) per 
capita per month for residential customers through 2009.  The tariff 
in 2010-2014 for residential customers will be fixed at GEL 2.95 
(about 1.8)
.  Commercial and other customers pay GEL 4.4 (about USD 
2.7) per cubic meter.  Reportedly, the company has already started 
metering some of the districts in Tbilisi.  According to Georgian 
press, Multiplex Solutions has no experience managing water supply 
networks and plans to contract an operator to run its newly 
 
TBILISI 00002797  002 OF 002 
 
 
purchased assets in Georgia. 
 
Railroad Buyer Quits Mysterious Deal 
------------------------------------ 
7. On October 24 the Georgian government confirmed that the 
announced plan to sell management rights for the Georgian Rail 
Company to the U.K.-based firm Parkfield had fallen through.  The 
decision to award Parkfield a 99-year management contract had been 
announced in August.  The firm, which like Multiplex in water 
systems, is largely unknown and inexperienced in the rail business. 
Parkfield had pledged to invest USD 1 billion in rehabilitation and 
development of the railway infrastructure for the next 10 years, and 
to hire a management company to run the business on its behalf.  The 
deal had immediately generated rumors that Russian capital was 
behind the bid, and some sources alleged the plan was to swap Imedi 
TV, a company owned by Badri Patarkatsishvili and the News 
Corporation, for the railroad.  On October 28, the government 
announced another tender to privatize the railroad, and State 
Minister Bendukidze publicly admitted that some mistakes had been 
made with the previous tender. 
 
Georgia's FDI and Foreign Trade Boost 
------------------------------------- 
8. Prime Minister Noghaideli announced at a Georgian investment 
roundtable in Vienna that, according to the latest statistics, 
direct foreign investments will contribute 25 percent of Georgia's 
GDP for 2007.  Saying "we are now starting another stage of 
investment attraction in Georgia," Noghaideli noted that the 2007 
figure was a sharp increase from 15 percent of GDP in 2006 and 7 
percent in 2005.  Foreign trade turnover has also increased 
markedly.  For the first nine months of 2007, the figure was GEL 4.4 
billion (USD 2.7 billion), 34.5 percent higher than in 2006.  Much 
of this increase in total trade is attributable to higher costs of 
energy imports, but exports have increased 25 percent in the first 
nine months of 2007 compared to the same period in 2006.  Georgia 
has a negative trade balance with 97 countries, and positive with 
23. 
 
TEFFT

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