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Reference ID Created Released Classification Origin
08TBILISI2378 2008-12-15 11:44 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Tbilisi

DE RUEHSI #2378/01 3501144
O 151144Z DEC 08

E.O. 12958: N/A 
1. (SBU) Summary:  Your visit to Georgia comes in the 
aftermath of the August conflict, which resulted in Russia's 
occupation and recognition of the independence of South 
Ossetia and Abkhazia.  Tension along the de facto boundaries 
remains high, and international monitors do not have access 
to South Ossetia.  Although many of those displaced by the 
war have returned to their homes, those displaced from South 
Ossetia itself and part of Abkhazia have not been granted 
access to return.  The war is the dominant political issue in 
Georgia.  On November 28, in an unprecedented event, 
President Saakashvili voluntarily defended his wartime 
decisions in testimony in front of a Parliamentary commission 
investigating the war.  Saakashvili remains an unrivaled 
figure who drives Georgian politics, but his wartime 
decisions have drawn significant criticism.  Opposition 
parties and leaders remain largely fractured and have not yet 
coalesced into a credible electoral alternative.  In October, 
Saakashvili named Grigol Mgaloblishvili (former Georgian 
Ambassador to Turkey) as Prime Minister, who has been charged 
with ensuring that international donors fulfill their pledges 
of assistance.  Several new ministers were appointed between 
December 5 and 9.  The moves have generated little public 
reaction and reflect no significant change in overall policy 
direction, although some opposition voices have been critical. 
2. (SBU) Domestically, the government of Georgia is focused 
on reconstruction of damaged infrastructure, supporting the 
economy, and exploring ways to integrate an estimated 30,000 
newly displaced persons into undisputed Georgian territory, 
at least temporarily.  The global economic downturn, coupled 
with the fallout of the August conflict, has slowed a once 
vibrant Georgian economy which, prior to the war, enjoyed 
double-digit growth rates and was the 15th best place in the 
world to do business.  In 2009, the government will be 
heavily dependent on foreign aid to achieve many of its 
reconstruction goals.  The USG has pledged $1 billion in 
total support and in November, transferred $250 million of 
direct budget support to the Georgian government.  A total of 
$4.5 billion of aid was pledged to Georgia at an October 
Donors Conference in Brussels, to be distributed over three 
years, although to date little - other than US assistance - 
has been disbursed.  Thus far, the government has weathered 
both the military and economic storms remarkably well and 
Saakashvili remains popular, but substantial challenges 
3. (SBU) During your visit, you will spend a full day at the 
Parliament, meeting with Speaker David Bakradze and multiple 
committees, as well as the two parliamentary opposition 
factions.  The current Parliament was elected in May, 2008, 
following a period of internal political tumult that began 
with protests in November 2007, and was followed by early 
presidential elections in January 2008.  Many of the MPs in 
the current Parliament are new to politics.  Speaker Bakradze 
is a close ally of Saakashvili, and has used his role as 
Speaker to represent Parliament domestically and 
internationally.  In the immediate aftermath of the war, 
Parliament worked with all opposition forces, including those 
outside of Parliament, in forming the Anti-Crisis Council 
(ACC).  Later, the Parliament formed the above-mentioned 
investigatory commission to examine the August conflict. 
Both the ACC and investigatory commission are chaired by 
opposition MPs, whom you will meet. 
Qopposition MPs, whom you will meet. 
4. (SBU) In addition to a day in Parliament and a trip to 
Gori, you will meet President Saakashvili.  You may want to 
congratulate Saakashvili for his openness to public inquiry 
and commitment to a new round of democratic reforms, to 
express support for Georgia's territorial integrity, 
development and recovery efforts, and to encourage the 
president to support an even more robust and pluralistic 
democratic system and greater media freedom.  You will also 
have the opportunity to discuss economic and domestic 
challenges with other members of the government.  End Summary. 
5. (SBU) In an effort to counter growing Russian PR efforts 
to define the conflict at the end of November, President 
Saakashvili voluntarily testified in front of Parliament. 
The country watched on live TV as the President sat before 
the Committee for five hours, first reading a prepared 
statement and then answering the questions.  Saakashvili 
admitted readily that he had made the decision for Georgian 
ground forces to enter South Ossetia in order to protect 
Georgian citizens in the territory.  Saakashvili defended the 
decision as "inevitable," because Russian troops were 
advancing into South Ossetia and Georgian-controlled villages 
were being h
eavily shelled.  Saakashvili claimed repeated 
TBILISI 00002378  002 OF 005 
attempts to speak with Russia's leaders and stop hostilities 
were rebuffed, and that he and the government were left no 
choice but to try and defend Georgia's citizens and 
sovereignty by force.  Saakashvili argued that any 
responsible democratic government in Georgia would have 
reached the same decision.  He said Georgia was neither a 
loser nor a winner in the war, as the struggle continues. 
However, he said the invasion demonstrated once and for all 
that Russia could not be considered a "peacekeeper" in 
6. (SBU) Despite the conflict, President Saakashvili remains 
broadly popular in the wake of the August conflict.  A 
September USAID-funded International Republican Institute 
(IRI) poll suggests Saakashvili continues to benefit from a 
public seeking stability.  His party, the United National 
Movement (UNM), has an overwhelming majority in Parliament in 
part because some opposition leaders rejected their seats. 
One opposition faction, the Christian Democrats, accepted its 
seats in Parliament and has seen its public standing grow. 
The remaining opposition appears fractured; some are calling 
for new parliamentary and presidential elections and staging 
protests, while others are starting to doubt the utility of 
constant protests and unpopular ultimatums urging the 
President to resign.  According to the IRI poll, the 
popularity and standing of opposition politicians have 
dropped and no figure has emerged to be the leader of a 
coherent opposition movement. 
7. (SBU) The situation has begun to shift in recent weeks. 
On November 23, since the poll was conducted, former 
Saakashvili confidant Nino Burjanadze launched her own party, 
Democratic Movement-United Georgia, which hopes to present a 
credible alternative to President Saakashvili and the UNM. 
On December 5, Georgian Ambassador to the UN Irakli Alasania 
tendered his resignation.  Alasania has long been courted by 
both the government and the opposition, and appears to be on 
the verge of announcing his future political intentions.  In 
the wake of Alasania's resignation, Prime Minister 
Mgaloblishvili announced two rounds of cabinet changes.  On 
December 6, Grigol Vashadze, current Minister of Culture and 
former Deputy Foreign Minister, was named Foreign Minister. 
Nika Gvaramia, a former Justice Minister, was named the 
Education Minister.  Georgia's Defense Minister during the 
conflict, Davit Kezerashvili, was initially replaced by his 
deputy Batu Kutelia on December 5, and then Kutelia was 
replaced December 9 by Georgia's Ambassador to the United 
States, David Sikharulidze.  Also on December 9, Lasha 
Zhvania, Chairman of the Parliamentary Committee for Foreign 
Affairs and former Georgian Ambassador to Israel, replaced 
Eka Sharashidze as Minister of Economic Development, and MP 
Nika Rurua, Deputy Chairman of the Committee for Defense and 
Security since 2004, became Minister of Culture.  The new 
line-up indicates Saakashvili's interest in bringing more 
dependable loyalists into the Cabinet and preempting 
recommendations to make changes expected from the special 
parliamentary committee investigating the war. 
8. (SBU)  The current Parliament was elected in May, 
following a period of internal political instability which 
began with street protests in November 2007.  The size of the 
Parliament was reduced from 235 seats to 150 in May, with 75 
filled from national party lists and 75 as single-mandate 
Qfilled from national party lists and 75 as single-mandate 
"majoritarian" seats.  The ruling United National Movement 
(UNM) party won 59 percent of the vote, and took 119 out of 
150 seats in the new Parliament.  The "United Opposition" 
fractured, as some members alleged the elections were rigged 
and illegitimate.  Following intense negotiation, the 
Christian-Democratic Movement (CDM), five MPs from the nited 
Opposition, two majoritarians and two Labor Party candidates 
joined the new Parliament.  Twelve opposition members refused 
their mandates entirely.  Four Labor Party candidates have 
neither refused their mandates, nor taken their seats.  Two 
vacant majoritarian seats were filled via by-elections in 
November.  The remaining party list seats will remain vacant 
for the duration of this Parliament.  It is important to note 
that due to the electoral system, there is no residency 
requirement for the majoritarian seats; consequently, MPs are 
seldom closely tied to a geographic constituency. 
9. (SBU) Parliament had barely coalesced in July, when the 
August invasion derailed its budding initiatives.  Now, 
Parliament is trying to help determine what went wrong, help 
fix it, and ensure it does not happen again.  Weakened 
somewhat as a check on the executive branch over the past few 
TBILISI 00002378  003 OF 005 
years, the new Parliament must show its mettle.  Many of the 
MPs in the current Parliament are new to politics, without 
significant legislative or governmental experience.  Speaker 
Bakradze, who is close to Saakashvili, has taken the lead on 
representing Parliament domestically and internationally, and 
is now trying to bolster Parliament to rise again as an 
effective broker for the people of Georgia.  In the immediate 
aftermath of the war, Parliament worked with all opposition 
forces, including those outside of Parliament, to forming the 
Anti-Crisis Council (ACC).  Later, the Parliament formed an 
investigatory commission to analyze the August conflict and 
the events precipitating it; the commission conducted weeks 
of testimony, capped off by a five-hour public appearance by 
President Saakashvili during which he offered an explanation 
for the actions taken during the August conflict.  The 
commission's final report is due out in the near future.  You 
will have the opportunity to meet with both groups during 
your visit. 
10. (SBU) On the issue of broader political reform, the 
government released a document laying out a variety of 
planned political reforms to improve democracy and pluralism 
in Georgia.  The ACC is involved in implementing many of 
these reforms.  The document acknowledges the mistakes the 
government made in its use of force to quell protests in 
November 2007.  The document closely follows President 
Saakashvili's September "State of the Nation" address to 
Parliament and his address to the UN General Assembly, in 
which he outlined his vision for a more democratic Georgia. 
The proposed (and in some cases completed) reforms include 
measures to strengthen Parliament; increase judicial 
independence; strengthen and increase the role of the 
opposition; and foster a more open media environment. 
Opposition members are skeptical of government motivations 
and are not satisfied with the breadth and pace of reforms. 
Opposition leaders are
 calling for, among other things, a 
freer and more fair media environment; a change to the 
electoral code; and more opposition access to 
decision-making.  In spite of opposition dissatisfaction, 
Saakashvili's administration appears committed to making good 
on President Saakashvili's reform promises. 
11. (SBU) On the economic front, the Georgian economy seems 
to be recovering slowly, after the shock of Russia's August 
invasion.  Preliminary estimates for negative growth have 
been revised and the government privately expects total GDP 
growth for 2008 to be around 4-5 percent, well below last 
year's growth of 12 percent.  The GOG is predicting four 
percent GDP growth for 2009, although some commentators 
suggest this figure is too optimistic, and will likely be 
closer to two percent.  The real test of the economy will 
come in the first quarter of 2009 when revenues traditionally 
slow.  The government has real concerns that unemployment 
numbers could skyrocket in light of the August conflict and 
overall global financial crisis.  While still weakened, the 
banking sector has been resilient and some modest lending has 
resumed.  A recent devaluation of the Georgian lari proceeded 
smoothly, but the public is wary that further devaluation is 
likely as the dollar continues to appreciate.  The overall 
credit crisis still threatens the recovery of the Georgian 
economy, which is heavily dependent on foreign direct 
investment (FDI) for growth.  The conflict has slowed the FDI 
Qinvestment (FDI) for growth.  The conflict has slowed the FDI 
stream considerably, and the government seeks to reassure 
investors about the stability of Georgia's market. A Deputy 
Secretary of Commerce-led trade delegation in October was 
greatly appreciated by the Government and led to several new 
investment deals. 
12. (SBU) Georgia does not appear to face immediate or 
medium-term liquidity problems.  Tax collection has resumed 
to normal levels, although the government fears a difficult 
first and second quarter.  The government worries that a 
slowing local and global economy will exacerbate this 
problem, but hopes to be able to fill some budgetary holes 
with foreign aid.  In general, Georgia is committed to its 
long-term growth strategy of lowering taxes and simplifying 
the tax code; reducing financial and business regulations to 
foster an open business climate; aggressively privatizing 
government held assets; and focusing funding on 
infrastructure projects to provide for long-term economic 
growth.  The conflict has forced the government to redirect 
some of its spending to acute social needs, in particular 
those of internally displaced persons (IDPs).  However, the 
long-term economic plan remains intact.  Georgia's economic 
team has seen success in the past: in 2008, Georgia was named 
TBILISI 00002378  004 OF 005 
the 15th best country in which to do business by the 
Economist.  The economy will continue to be a key domestic 
issue as the President Saakashvili and the ruling National 
Movement have substantially staked their electoral fortunes 
on the ability to provide robust economic growth. 
13. (SBU) The situation on the ground along the 
administrative boundary lines of Abkhazia and South Ossetia 
remains very tense and is unlikely to improve soon.  Violent, 
even fatal, incidents are frequent, primarily caused by 
Russia, Abkhaz or South Ossetian soldiers, and carry 
considerable risk of escalation.  On December 10, unknown 
assailants fired at and hit a marked OSCE armored patrol 
vehicle with automatic rifle fire, near the South Ossetian 
administrative boundary.  Three international organizations 
monitor the situation and help deter the resumption of 
hostilities: the UN Observer Mission in Georgia (UNOMIG), 
which operates inside and outside Abkhazia; the OSCE Mission 
to Georgia, which currently operates outside South Ossetia; 
and the EU Monitoring Mission (EUMM), which currently 
operates outside both regions.  Both the OSCE and EUMM have 
been effectively blocked from crossing the boundaries, which 
limits their effectiveness.  No international organization 
except for UNHCR has regular access to South Ossetia, 
increasing the concern of humanitarian crisis.  Russia has 
publicly announced it will maintain 3,800 troops in each of 
the breakaway regions and is reportedly building military 
bases in both.  Although the EUMM has been working with the 
Georgian government to keep its military forces away from the 
boundaries, no international organization has been able to 
work on this issue with the Russians or the de facto 
governments on the Abkhazian and South Ossetian sides.  The 
international community therefore has little means to 
determine if the Russian and de facto governments are taking 
steps to prepare for renewed hostilities. 
14. (SBU) Points 3 and 5 of the August 12 cease-fire 
agreement respectively require free access for humanitarian 
assistance to the conflict zones and the withdrawal by 
Russian forces to their positions held before the war. 
Russia and the de facto authorities, in particular the South 
Ossetians, have not provided free access to humanitarian 
organizations, and Russia has not withdrawn its forces to 
their pre-war positions.  Particularly egregious examples 
include the massive increase of Russian military presence in 
both regions and the occupation of the Akhalgori Valley in 
eastern South Ossetia, which before the war was outside of 
the "zone of conflict," was administered by Georgian 
authorities and had no Russian presence.  The lack of access 
by humanitarian organizations, in particular to South 
Ossetia, has left the international community unable to 
answer serious questions about the human rights situation in 
both regions and with no ability to investigate the charge 
that the South Ossetians engaged in ethnic cleansing.  Over 
20,000 displaced persons from South Ossetia cannot return to 
their homes.  In Abkhazia, several hundred cannot return to 
their homes, and there is considerable evidence of an 
intentional campaign to drive ethnic Georgians from their 
homes, then destroy those homes to prevent their return.  A 
total of about 30,000 new IDPs, combined with hundreds of 
thousands of IDPs from earlier conflicts, have created 
significant humanitarian challenges.  The government has 
Qsignificant humanitarian challenges.  The government has 
impressively managed to build several thousand new homes for 
many of the new IDPs in time for winter, but longer-term 
needs remain, such as jobs.  However, as increased attention 
is being paid to the new IDPs, an older generation of IDPs 
from the 1993-94 war with Abkhazia, numbering more than 
225,000, is beginning to feel resentment for what it 
considers years of neglect. 
15. (SBU) On the political level, the EU has taken the lead 
in starting a process of international discussions in Ge
(in accordance with Point 6 of the cease-fire).  Official 
parties to the talks are the EU, OSCE, UN, Georgia, Russia 
and the U.S.; there has been considerable controversy over 
the informal participation of the de facto authorities, as 
well as representatives of Tbilisi-supported Abkhaz and South 
Ossetian groups.  The second round of talks on November 18-19 
went reasonably well, with all participants willing to accept 
security/stability and IDP returns as the basic areas for 
discussion.  The next meeting will be on December 17-18.  We 
hope that this forum can provide a space to address the more 
urgent issues, such as security.  However, consideration of 
the thornier issues, such as the final political status of 
the two regions, will likely be postponed for some time. 
TBILISI 00002378  005 OF 005 
16. (SBU) Georgian government officials hailed the December 
NATO Ministerial in Brussels as a victory for Georgia.  They 
said the decision to intensify cooperation between Tbilisi 
and NATO and invigorate the NATO-Georgia Commission (NGC) 
would play a central role in moving Georgia toward 
membership.  Opposition figures, however, have been more 
critical, stating that the ministerial's result is not a 
victory, but a significant loss.  They blame Saakashvili for 
ruining Georgia's chances at MAP.  Both the government and 
opposition are trying topresent the Brussels Ministerial to 
their advantage.  Opposition attacks on the issue are 
stronger than in the past, and the fact that MAP appears off 
the table provides an opening on a key Saakashvili policy 
objective.  Russian Prime Minister Putin was also widely 
quoted in the Georgian press as hailing the decision in yet 
another stab at the Saakashvili government.  In spite of the 
Government's best efforts, some Georgians see Brussels as a 
defeat for the U.S. and for Georgia and are questioning 
Georgia's Euro-Atlantic strategic choice.  In spite of that, 
for now, most Georgians support membership in NATO and still 
see it as their strongest, irreversible step into the West. 


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