Daily Archives: February 18, 2010

10TBILISI206, OPIC FINANCING: BETSY’S HOTEL PROJECT

WikiLeaks Link

To understand the justification used for the classification of each cable, please use this WikiSource article as reference.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #10TBILISI206.
Reference ID Created Released Classification Origin
10TBILISI206 2010-02-18 14:29 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Tbilisi

VZCZCXRO6769
RR RUEHIK
DE RUEHSI #0206 0491429
ZNR UUUUU ZZH
R 181429Z FEB 10
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC 2893
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS TBILISI 000206 
 
DEPT FOR EUR/CARC, EEB 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT PASS TO KENNETH ANGEL 
 
E.O. 12958: N/A 
TAGS: EINV EFIN GG
SUBJECT: OPIC FINANCING: BETSY'S HOTEL PROJECT 
 
REF:  STATE 09960 
 
1. Summary:  In response to reftel, Post's inquiry into Betsy's 
Hotel revealed no negative information that would impede issuance of 
OPIC credit to the company. End Summary. 
 
2.  Betsy's is a boutique hotel overlooking the center of Tbilisi. 
The hotel has been functioning successfully for about 15 years. A 
series of expansions and upgrades reflect the hotel's success. 
Betsy's hotel enjoys a good reputation and the efforts of its 
management have turned it into a preferred place of stay for 
visitors coming to Georgia, especially those who are looking for 
longer-term accommodations. 
 
3.  In general, the hotel business in Georgia has suffered from the 
consequences of 2008 August war with Russia and global economic 
crisis, resulting into a sharp decline into the number of tourists. 
However, any negative effect on Betsy's hotel has been minimal due 
to the fact that its clients are mostly visitors who arrive through 
donor-funded (US Embassy and AID contractors included) projects. 
The current occupancy rate at Betsy's has returned to a pre-war 
level of 65 percent, and the outlook for future operations is more 
positive. 
 
4.  Steven Johnson, the primary owner and General Manager of Betsy's 
hotel, is well known to the Embassy and a board member of the 
American Chamber of Commerce in Georgia.  Mr. Johnson also owns an 
English language bookstore - Prospero's Books.  Post is unaware of 
any negative information concerning the financial standing of 
Betsy's Hotel.  Additionally, Post has no negative information 
regarding terrorism, money laundering, corruption or other charges 
about the owners and managers of the hotel. 
 
BASS

Wikileaks

Advertisements

10TBILISI205, GEORGIA: SCENESETTER FOR EWG AND VISIT OF EEB A/S

WikiLeaks Link

To understand the justification used for the classification of each cable, please use this WikiSource article as reference.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #10TBILISI205.
Reference ID Created Released Classification Origin
10TBILISI205 2010-02-18 14:29 2011-08-30 01:44 SECRET Embassy Tbilisi

VZCZCXRO6764
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL
DE RUEHSI #0205/01 0491429
ZNY SSSSS ZZH
P 181429Z FEB 10
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC PRIORITY 2889
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

S E C R E T SECTION 01 OF 04 TBILISI 000205 
 
SIPDIS 
 
E.O. 12958: DECL: 02/15/2020 
TAGS: ECON EINV PGOV PREL GG
SUBJECT: GEORGIA: SCENESETTER FOR EWG AND VISIT OF EEB A/S 
FERNANDEZ 
 
Classified By: Ambassador John R. Bass for reasons 1.5 (b) and (d). 
 
1.  (C) SUMMARY:  Once infamous for its rampant corruption 
and organized crime, Georgia is now a model of reform among 
post-Soviet economies.  The economy and Georgia's 
pro-business orientation are top priorities for President 
Saakashvili and he is quick to highlight his government's 
successes.  Managing a weakened economy that is starting to 
rebound from the August 2008 conflict with Russia and the 
world economic crisis remains the biggest domestic challenge 
for the Government.  However, as the Government focuses on 
finding new sources of financing and investment, it risks 
backsliding on the very reforms that define its success. 
Because the Saakashvili government in office only until 2013, 
there is a feeling that time is short and reform must happen 
now; if it is delayed, the opportunity might pass.  As the 
prime initiator of economic reform, the Government is pushing 
ahead at all costs, and even public comment on laws sometimes 
remains a luxury policymakers believe they can not afford. 
Your visit and the Economic Working Group provide 
opportunities to encourage the government to stay the path of 
reform, but to also bring others into the process.  Despite 
recent missteps, Georgia values its international reputation 
and listens carefully to its international partners and the 
business community.  The Economic Working Group is a great 
venue to deliver a straightforward message: without 
implementation of promised reforms, increased transparency 
and greater predictability, and further development of rule 
of law, Georgia will struggle to attract legitimate, serious 
western investors.  END SUMMARY. 
 
CHALLENGES ) WAR, FINANCIAL CRISIS 
 
2. (C) After several years of double digit GDP growth and 
deepening economic reforms following the 2003 Rose 
Revolution, 2008 and 2009 were difficult, both politically 
and economically, for Georgia.  In addition to the loss of 
20% of Georgia's territory, the Georgian economy was hit hard 
during the August 2008 war with Russia.  Russian troops 
controlled the country's major port and cross-country 
highway, stopping commerce into the region.  More than 30,000 
new internally displaced persons (IDPs) added to the stress 
on the Georgian budget, as the government struggled to 
quickly house these people before winter.  Although most 
foreign investors stayed in place, inflows of new foreign 
direct investment slowed to a trickle as plans for new 
investments were put on hold or shelved.  A few months later, 
the global financial crisis caused an even greater shock to 
the economy, with unemployment increasing sharply and 
investment and government revenues dropping precipitously. 
While pledges of assistance helped mitigate the worst of the 
financial crisis, led by the U.S. with our pledge of $1 
billion in post-conflict aid, the economy shrunk four percent 
in 2009.  The Georgian Government was further challenged by 
domestic protests from April to July 2009 that negatively 
affected tax collection and discouraged investors.  GDP is 
projected to grow by two percent in 2010, assuming continued 
global economic growth and the return of international 
investments. 
 
A CALMER GEORGIA, BUT INSECURITY RULES 
 
3. (S) While today Georgia is calmer and more stable, these 
improvements are far from durable and a palpable sense of 
insecurity permeates society and politics.  Miscalculations 
and provocations - domestically, in the territories or north 
Qand provocations - domestically, in the territories or north 
across the mountains - could easily spark renewed crisis. 
With a stabilized economy and no viable rival, President 
Saakashvili is stronger politically but paradoxically more 
insecure, burdened by the fear history will judge him to have 
lost irrevocably the occupied territories and concerned that 
our measured approach to defense cooperation and engagement 
with Moscow presage a deeper reorientation of U.S. interests. 
 These concerns are reinforced by a steady drumbeat of 
Russian accusations about the legitimacy and behavior of his 
government and comparative silence from the West about 
Moscow's consolidation of its position in the territories. 
In this hothouse environment, your visit is an important, 
visible manifestation of our commitment to support Georgia's 
reform and Euro-Atlantic aspirations - and an opportunity to 
remind the government that realization of those aspirations 
ultimately depends on a renewed commitment to deeper 
democratic and economic reforms.  Saakashvili continues to 
cast about for the "one big thing" that will secure Georgia's 
place in the west.  Our challenge is to convince President 
Saakashvili that the "one big thing" is a renewed commitment 
to Georgia's democratic and economic development, even while 
we work to prevent a slide back into conflict and instability. 
 
GEORGIA ) A MODEL FOR ECONOMIC REFORM 
 
TBILISI 00000205  002 OF 004 
 
 
 
4. (C)
Although often overshadowed by political crisis and 
conflict over the separatist territories, reform and 
modernization of the Georgian economy has been one of the 
most tangible successes of the Rose Revolution.  When it came 
to power in early 2004, the Saakashvili government inherited 
a barely functioning economy rampant with corruption and 
controlled by organized crime.  The government quickly took 
steps, including a complete overhaul of the police and an 
aggressive no-tolerance policy for organized crime, to 
legitimize the economy.  This led to increased jobs, 
increased tax collection and increased government revenue, 
fueled by large inflows of foreign direct investment and an 
aggressive privatization program. 
 
5.  (SBU) The Saakashvili government inherited a broken 
energy sector, where even in the capital electricity and gas 
were often unavailable.  The government worked hard to 
diversify energy supplies and decrease its dependence on 
Russia.  Georgia now has long-term energy agreements with 
Azerbaijan to provide natural gas.  Thanks to a renewed 
government focus on developing Georgia's plethora of 
hydropower resources, the country is now a net exporter of 
electricity, selling kilowatts to Russia, Turkey and the 
larger Caucasus region.  Planned infrastructure projects 
funded by the United States as well as other international 
donors and financial institutions will further strengthen 
Georgia's energy infrastructure, allowing for greater energy 
security and increased exports to energy starved markets in 
Eastern Turkey. 
 
RUSSIAN EMBARGO HAMPERS THEN STRENGTHENS ECONOMY 
 
6.  (C) An additional roadblock was thrown into Georgia's 
path towards economic development in 2006, when Russia ) its 
largest trading partner ) put into place a complete embargo 
on all Georgian goods.  Georgian companies struggled to find 
new markets for Georgian goods, including its famous wine. 
Although Russia still prohibits the import of Georgian 
products, the Georgian economy has more than rebounded.  It 
has diversified with new markets throughout the former Soviet 
Union and Europe, and has increased the overall quality of 
its goods to better compete.  Georgia is a member of the WTO 
and is currently discussing a free trade agreement with the 
European Union.  Georgia benefits from the U.S. General 
System of Preferences program and is keen to discuss the 
possibility of free trade with the United States.  We are in 
the process of discussing a new Bilateral Investment Treaty 
with Georgia to help promote further U.S. investments. 
 
CHALLENGES REMAIN ) TRANSPARENCY, PREDICTABILITY 
 
7.  (C) In spite of the global financial crisis, Georgia's 
economy is stronger and more resilient than it was five years 
ago.  Many business people you will meet during your visit 
will highlight the importance of Georgia's reforms and the 
improvements to the business climate during the past five 
years.  They will point out that Georgia is now 11th on the 
World Bank's "Ease of Doing Business Report," and was 
recognized internationally in 2009 for its sustained 
performance in reforming the laws and regulations that 
determine the business enabling environment.  In fact, the 
GoG deserves great credit for simplifying the process of 
opening a business, and has streamlined taxes and engaged the 
business community in a constructive dialogue.  It has fought 
against low-level corruption and won.  The government has 
successfully harvested the low-hanging fruit of reform and 
Qsuccessfully harvested the low-hanging fruit of reform and 
reaped the benefits. 
 
IMPLEMENTATION AND PERCEPTION 
 
8.  (C) Now, Georgia must tackle the harder issues - 
including transparency, predictability, and rule of law.  As 
Georgia's share of the economic pie has shrunk, there have 
been more accusations of higher-level corruption and an 
increase in government control of and intervention into the 
market.  Businesses perceive the government to be weighted in 
favor of companies that are willing to bend the rules, and do 
not believe the Georgian legal system can protect them. 
While Georgia has quickly adopted legislation to improve the 
judicial system, it has been slower to implement these 
protections.  Increased aggressiveness and lack of 
transparency in tax collections during the past six months 
worry the business community, as Georgia seems to be backing 
away from the reforms that brought it success.  Your visit 
provides an ideal opportunity to stress to all that Georgia 
must hold strong on its path of economic reform if it is to 
succeed in transforming this formerly failed state.  If 
Georgia wants the foreign investment it so desperately seeks, 
it must complete its reform of the legal system; it must also 
 
TBILISI 00000205  003 OF 004 
 
 
present and protect a transparent, level-playing field where 
businesses can compete.  In business, perceptions are as 
important as reality.  If serious western investors hear that 
they can not get a fair shake in Georgia, they will look to 
other more predictable markets.  The competition for 
investment dollars is fiercer than ever, and Georgia has to 
show both the political will and the willingness to tackle 
the hard issues if it wants to win. 
 
CONFLICT AND INSECURITY 
 
9.  (C) It is hard to overestimate the extent to which an 
intense climate of insecurity permeates Georgian society and 
political culture.  Russian forces, located as close as 25 
miles to Tbilisi, are building permanent bases and Georgians 
confront a steady drip of Russian statements alleging 
Georgian aggression or announcing the latest step in 
incorporating Abkhazia into Russia's economy.  Moscow's 
statements suggesting that Georgia is planning provocations 
in the North Caucasus have raised fears among Georgian 
officials that Russia is looking for another pretext for 
armed conflict.  Tbilisi, in turn, is overly focused on 
weapons acquisition as an antidote to its jitters. It fears 
our approach to defense cooperation (heavily focused on 
developing the structures and processes to assess threats, 
develop appropriate responses and make informed decisions 
about use of force before moving to acquisition) is a 
trade-off to secure Russian cooperation on other issues, such 
as Iran. 
 
10.  (C) The immediate security environment has stabilized, 
with fewer incidents along the administrative boundaries with 
the separatist territories of Abkhazia and South Ossetia. 
Shootings and explosions still occur, but much less 
frequently; detentions are the major source of tension, 
especially around South Ossetia.  Overall the Abkhaz de facto 
authorities have proven more interested in engaging with 
international partners.  The South Ossetians are steadfastly 
uncooperative, even when proposals would benefit their own 
residents. 
 
DOMESTIC POLITICAL CHALLENGES 
 
11.  (SBU) The Saakashvili-led United National Movement (UNM) 
continu
es to hold a constitutional majority in Parliament, 
and its current poll numbers reflect broad popular support. 
The government's restrained handling of the months-long 
opposition protests in 2009 reinforced Saakashvili's and his 
party's popularity throughout the country and reduced support 
for opposition leaders.  The government has made tangible 
democratic progress, including the passage of a new electoral 
code in December, 2009, which will set rules for upcoming May 
2010 municipal elections. The divergent positions and motives 
of the opposition precluded the kind of grand bargain which 
could have turned the electoral code into an engine for new 
democratic reforms.  In the current zero-sum environment, the 
government did not stretch itself, either.  The revised code 
has been sent to the Council of Europe's Venice Commission to 
assess its adherence to international standards.  Substantial 
government influence, if not outright control, over broadcast 
and other media pose significant challenges to the 
opposition.  In addition, the government has formed a 
constitutional commission to review ideas for constitutional 
change to lessen the power of the president. 
 
MEDIA ENVIRONMENT 
 
13. (SBU) Georgian media at present reflect the polarized 
political environment in the country, largely divided into 
pro-government and pro-opposition operations.  Nationwide 
Qpro-government and pro-opposition operations.  Nationwide 
television channels remain the main source of information for 
most people.  Television content is limited, resulting in a 
majority of the population that is poorly informed about a 
variety of issues and everyday concerns.  There are no hard 
walls separating the editorial and management sides of media 
organizations.  The media market is small, creating financial 
challenges.  Journalists are low-paid and practice 
self-censorship. 
 
RELATIONS WITH RUSSIA 
 
13. (SBU) While official relations between Russia and Georgia 
remain contentious, the two governments reached a preliminary 
agreement in December to reopen a border crossing for transit 
traffic to Armenia and limited access for Georgians, and the 
government has indicated that it is willing to sign a 
protocol as early as March.  Georgian Airways ran a few 
charter flights to Moscow and St. Petersburg in January -- 
the first direct commercial flights since a brief period in 
2008 -- and is negotiating for permission for more regular 
 
TBILISI 00000205  004 OF 004 
 
 
flights.  The Russian embargo remains in place against 
Georgian products, though Russian goods are readily available 
in Georgia. 
 
A TOUGH NEIGHBORHOOD 
 
14. (C) Georgia is concerned by a significant increase in 
military supplies from Russia to Armenia planned for 2010 
primarily via overflights between Russia and Armenia. 
Although Georgia has continued to allow the flights to 
maintain a good relationship with Armenia, it does not 
believe Armenia has the capacity to use these shipments 
itself and fears that such armaments as large-caliber 
ammunition for aircraft could be intended for Russian forces 
in Armenia, instead of the Armenian military.  Not only could 
such shipments disrupt the balance in the Nagorno-Karabakh 
conflict, but they could potentially be used to squeeze 
Georgia from the south as well. 
 
15. (S) Georgia is also trying to manage its relationship 
with Iran.  Georgia agrees with many of our concerns about 
Iran's policies, and has been willing to raise those concerns 
directly with the Iranians.  Georgia still faces lingering 
anger from Tehran for extraditing an Iranian arms smuggler to 
the United States several years ago.  At the same time, it 
cannot afford to alienate a powerful regional neighbor and a 
potential major commercial partner -- especially as it seeks 
to prevent any further recognitions of the breakaway regions. 
 Although the government has assured us that a proposed hydro 
project does not involve Iranian banks, we continue to 
monitor the deal. 
BASS

Wikileaks

10TBILISI203, GEORGIA: SCENESETTER FOR SPECIAL REPRESENTATIVE

WikiLeaks Link

To understand the justification used for the classification of each cable, please use this WikiSource article as reference.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #10TBILISI203.
Reference ID Created Released Classification Origin
10TBILISI203 2010-02-18 05:28 2011-08-30 01:44 SECRET//NOFORN Embassy Tbilisi
Appears in these articles:
http://rusrep.ru/article/2010/12/07/saakashvili/

VZCZCXRO6408
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL
DE RUEHSI #0203/01 0490528
ZNY SSSSS ZZH
O 180528Z FEB 10
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2884
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
RUEHIL/AMEMBASSY ISLAMABAD IMMEDIATE 0082
RUEHBUL/AMEMBASSY KABUL IMMEDIATE 0046
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC IMMEDIATE
RUEKJCS/OSD WASHINGTON DC IMMEDIATE

S E C R E T SECTION 01 OF 04 TBILISI 000203 
 
NOFORN 
SIPDIS 
 
E.O. 12958: DECL: 02/17/2020 
TAGS: PREL PGOV MOPS MARR OTRA OVIP AF RS GG
SUBJECT: GEORGIA: SCENESETTER FOR SPECIAL REPRESENTATIVE 
HOLBROOKE'S VISIT 
 
Classified By: Ambass...

S E C R E T SECTION 01 OF 04 TBILISI 000203 NOFORN SIPDIS E.O. 12958: DECL: 02/17/2020 TAGS: PREL PGOV MOPS MARR OTRA OVIP AF RS GG
1. (S) Summary. Georgia is calmer and more stable than at any time since the war, but those improvements are far from durable. A palpable sense of insecurity still permeates society and politics. Miscalculations and provocations - domestically, in the territories or north across the mountains - could easily spark renewed crisis. With a more stable economy and no viable rival, President Saakashvili is stronger politically, but paradoxically more insecure, burdened by the fear history will judge him to have lost irrevocably the occupied territories. He is also concerned our measured approach to defense cooperation and engagement with Moscow presage a deeper reorientation of U.S. interests. These concerns are reinforced by a steady drumbeat of Russian accusations about the legitimacy and behavior of his government and comparative silence from the West about Moscow's consolidation of its position in the territries. In this hothouse environment, your visit is an important, visible manifestation of the depth of our partnership, and of the enduring commitment of the United States to support Georgia's aspirations to move west.
2. (S) Much of the government and society are still motivated by the lure of Euro-Atlantic integration. Fears that Georgia will remain in the West's waiting room in perpetuity have sparked a minority to begin discussing the viability of a deal with Moscow in order to reintegrate the territories. These trial balloons, and Moscow's ongoing efforts to de-legitimize the government and create more palatable alternatives, further polarize a political environment that encourages zero-sum thinking and hinders deeper democratic and economic reforms. Saakashvili continues to cast about for the "one big thing" that will secure Georgia's place in the west, recently adding an offer to NATO and the U.S. to provide a logistics hub for Afghanistan to his substantial troop commitment over the next two years. Our challenge is to convince President Saakashvili that he risks losing the enormous goodwill generated by Georgia's extraordinary contributions in Afghanistan if he fails to combine them with a new push to deepen Georgia's democratic development. Your visit gives us a chance to thank Georgia publicly for its contribution, providing reassurance of our support, and thereby creating space for Saakashvili to feel secure enough to do the right thing. End Summary.
3. (C) The upcoming deployment to Afghanistan is arguably the most visible example of President Saakashvili's continued determination to anchor Georgia firmly in the west. The two-year deployment commitment follows an extant deployment of a reinforced light infantry company (173 troops) under French command and anticipates a likely additional partnership with the UK. The Georgians did well in their mission-readiness exercise last month; U.S. evaluators determined that the Georgian troops are sufficiently trained "to conduct the full spectrum of combat operations in a counter-insurgency environment" with their parent Marine Expeditionary Brigade. The battalion is continuing its training program (which you will observe) for an expected deployment in April.
4. (C) Despite the substantial commitment Georgia has made to Q4. (C) Despite the substantial commitment Georgia has made to the effort in Afghanistan, public discussion of Georgia's involvement has been limited. President Saakashvili has made the case that the commitment is directly linked to Georgia's own security, arguing publicly that "as soon as the Afghan situation is resolved and the war is over in Iraq, Georgia will be more protected." He has also pointed out that serving in Afghanistan will give Georgian soldiers useful combat experience. Officials have avoided suggesting that the contribution will help Georgia get into NATO, saying instead that it will help Georgia demonstrate itself as a contributing partner, with the apparent implication that NATO allies will then take Georgia more seriously. Foreign Minister Vashadze, for example, described Georgia's efforts as "our contribution to the tasks the alliance is trying to resolve in Afghanistan . . . the fight against terrorism, the fight against drug trafficking." Opposition members have been mostly silent on the topic and offered little public criticism of the contribution, either on its own terms or as a strategy for moving toward NATO membership, although parliamentary opposition leader Giorgi Targamadze expres
sed support for the deployment to Deputy Secretary Steinberg during his February 5 visit to Tbilisi. Another opposition TBILISI 00000203 002 OF 004 leader, Irakli Alasania, even used language similar to the government's when he said, "We should not be only consumers of security, but we also should be contributors to international security." Overall, your visit provides an opportunity not only to raise the profile of Georgia's involvement, but to frame the discussion in a helpful context.
5. (C) The training program -- the Georgian Deployment Program-ISAF (GDP-ISAF) -- has been in progress since September 1, 2009. Training includes broad hands-on training, from marksmanship to identifying and safely disposing of Improvised Explosive Devices (IEDs). This hands-on training is supplemented by classroom seminars, ranging from cultural familiarization to medical officer training. Rather than remaining in a static position like in their current mission with the French, these Georgian troops will share "battlespace" with the U.S. Marines and be responsible for conducting the same combat mission as the U.S. Marines, without national caveats to the rules of engagement. The Georgians will also send two Georgian staff officers to ISAF under Turkish command, providing liaison to the Afghan MOD and National Defense Staff for one year.
6. (C) Whether they make the connection explicit or not, the Georgians see their contributions to Afghanistan as a down payment on their admission into NATO. Support for NATO remains high in Georgia. After the Alliance's declaration at Bucharest in April 2008 that Georgia would eventually be a member and after the war in August, NATO has been intensifying relations with Georgia under the aegis of the NATO-Georgia Commission (NGC). Through the NGC, Georgia and the Alliance have worked closely on an Annual National Program (ANP), which is designed to help Georgia advance reforms in areas key for membership, including political, economic, and defense reforms. Georgia continues to be a strong supporter of NATO operations and is a contributor to international security missions, including in particular ISAF in Afghanistan. The challenge is to express our appreciation for those efforts, but deliver the candid message that such contributions are a helpful, but insufficient step toward membership without the concomitant progress on the civilian side.
7. (C) It is hard to overestimate the extent to which an intense climate of insecurity permeates Georgian society and political culture. Russian forces, located as close as 25 miles outside of Tbilisi, are building permanent bases and Georgians hear a steady drip of Russian statements alleging Georgian aggression or announcing the latest step in incorporating Abkhazia into Russia's economy. Moscow's statements suggesting that Georgia is planning provocations in the North Caucasus have raised fears among Georgian officials that Russia is looking for another pretext. Tbilisi, in turn, is overly focused on weapons acquisition as an antidote to its jitters. It fears our approach to defense cooperation (heavily focused on developing the structures and processes to assess threats, develop appropriate responses and make informed decisions about use of force before moving to acquisition) is a trade-off to secure Russian cooperation on other issues, such as Iran. Your discussion of our Qon other issues, such as Iran. Your discussion of our broader efforts with Moscow will help reinforce with Saakashvili that we do not see this as a zero-sum equation - and that Georgia also benefits from Moscow's cooperation on the wider agenda.
8. (C) The immediate security environment has stabilized, with fewer incidents along the administrative boundaries. Shootings and explosions still occur, but much less frequently; in the age-old tradition of the Caucasus, detentions have become the major source of tension, especially around South Ossetia. The Incident Prevention and Response Mechanisms (IPRMs) established by the Geneva talks have helped increase communication and decrease the volatility of individual incidents, especially in Abkhazia; the South Ossetian de facto authorities have refused to participate in their IPRM since October 2009, pending the resolution of three missing persons cases. Overall the Abkhaz de facto authorities are more interested in engaging with partners other than Russia and are therefore more constructive in the IPRM and in Geneva; they continue to allow international partners to operate inside Abkhazia. The South Ossetians are steadfastly uncooperative, even when TBILISI 00000203 003 OF 004 proposals would benefit their own residents. Local residents still face limitations on movements and other human rights concerns in both regions.
9. (C) A maturing Georgian policy on the territories reflects growing recognition that there is no short-term - or military - path to reintegrate them into Georgia, but implementation may founder on Abkhaz or Russian insistence on first discussing the status of the two regions as a way to gain international acceptance of Russia's recognition of both. A key question is the extent to which the de factos control their own fate versus Russia orchestrating the immediate security ups and downs; the Georgians are convinced the Abkhaz/South Ossetian good cop-bad cop routine is played at the behest of the Russians. No one expects much constructive reaction to the strategy from South Ossetia, but a positive response from Abkhazia, even on relatively modest activities, could indicate sincere interest in moving away from Moscow's orbit and finding some accommodation with Tbilisi. We are currently developing ways the United States will support the strategy's objectives through our own activities.
10. (SBU) Even in Abkhazia, however, the underlying situation remains fundamentally unstable. Georgia and Russia disagree profoundly over the source of the instability and the direction the parties must take toward resolution of the conflict. This impasse has become more and more apparent in Geneva, where Georgia sees Russia as a party to the conflict and an existential threat, while Russia sees itself as a keeper of the peace analogous to the EUMM. The Geneva co-chairs have tried to square this circle by combining Russia's demand for a non-use of force agreement (between Georgia and the regions) with Georgia's demand for new international security arrangements, but Russia refuses to contemplate any new international presence. Even the Georgians agree that the talks provide a useful forum for engagement among the parties, but if we continue to see no progress on what should be simple issues, we will have to reconsider the usefulness of Geneva.
11. (SBU) The Saakashvili-led United National Movement (UNM) continues to hold a constitutional majority in Parliament, and its current poll numbers reflect broad popular support. The government's restrained handling of the months-long opposition protests in 2009 reinforced Saakashvili's and his party's popularity throughout the country and reduced support for opposition leaders. A rapidly shrinking economy, Saakashvili's sharpest challenge in 2009, seems to have stabilized beginning in late 2009. Although consumer indicators are improving, the economy remains a concern, as unemployment is up and investments and government revenues have fallen. International assistance, particularly the U.S. provision of USD one billion in aid following the August 2008 conflict, helped insulate Georgia from the worst of the global financial crisis and has provided a significant base for recovery. The EU, other donors and international financial institutions are providing an additional USD 3.5 billion in post-conflict assistance to Georgia.
12. (SBU) The government has made some tangible democratic progre
ss in a number of areas, including passing a new Qprogress in a number of areas, including passing a new electoral code on December 28, 2009, which will set rules for upcoming May 2010 municipal elections. The divergent positions and motives of the opposition (which ranges from "responsible" parties who sit in parliament to "irreconcilable" ones who insist on Saakashvili's early departure or removal before engaging in any dialogue) precluded the kind of grand bargain which could have turned the electoral code into an engine for new democratic reforms. In the current zero-sum environment, the government did not stretch itself, either. The revised election code has been sent to the Council of Europe's Venice Commission for legal comment on whether it meets international standards; the Georgians expect to receive a response by March. President Saakashvili agreed to allow for the direct election of the Tbilisi mayor, giving the opposition a chance to control this politically important post in Georgia's most opposition-minded city. However, substantial government influence, if not outright control, over broadcast and other media steepen the slope the opposition needs to climb. In addition, the government has formed a constitutional commission to review ideas for constitutional change to TBILISI 00000203 004 OF 004 lessen the power of the president.
13. (SBU) Opposition leaders, representing parties both inside and outside of Parliament, generally urge the United States and international community to do more to level the electoral playing field in Georgia by emphasizing the importance of U.S. support to strengthen civil society, improve the media climate, and foster increased political pluralism. Much of the public is still looking for the government to make good on its promises of a new wave of democratic reform as articulated by Saakashvili after the August 2008 conflict. The opposition argues that Saakashvili has consolidated power over the past seven years and is increasingly moving in an authoritarian direction. However, there is little agreement among opposition forces as to what needs to be done or what a good alternative political program would be.
14. (SBU) Georgian media at present reflect the polarized political environment in the country, largely divided into pro-government and pro-opposition operations. Nationwide television channels remain the main source of information for most people. Television content is limited, resulting in a majority of the population which is poorly informed about a variety of issues and everyday concerns. Limited news programming by the Georgian Public Broadcaster in Azeri, Armenian and Russian leaves members of ethnic minorities poorly informed about developments in Georgia; many receive news via satellite from Azerbaijan, Armenia and Russia. There are no hard walls separating the editorial and management sides of media organizations. The media market is small, creating financial challenges. Journalists are low-paid and tend to practice self-censorship.
15. (SBU) While official relations between Russia and Georgia remain contentious, the two governments reached a preliminary agreement in December to reopen a border crossing for transit traffic to Armenia and limited access for Georgians, and the government has indicated that it could be willing to sign a protocol as early as March. Georgian Airways ran a few charter flights to Moscow and St. Petersburg in January -- the first direct commercial flights since a brief period in 2008 -- and is negotiating for permission for more regular flights.
16. (C) Georgia is also concerned by a significant increase in military supplies from Russia to Armenia planned for 2010 primarily via overflights between Russia and Armenia. Although Georgia has continued to allow the flights to maintain a good relationship with Armenia, it does not believe Armenia has the capacity to use these shipments itself and fears that such armaments as large-caliber ammunition for aircraft could be intended for Russian forces in Armenia, instead of the Armenian military. Not only could such shipments disrupt the balance in the Nagorno-Karabakh conflict, but they could potentially be used to squeeze Georgia from the south as well should there be a future conflict with Russia.
17. (S) Georgia is also trying to manage its relationship with Iran. Georgia agrees with many of our concerns about Iran's policies, and has been willing to raise those concerns directly with the Iranians. Georgia still faces lingering Qdirectly with the Iranians. Georgia still faces lingering anger from Tehran for extraditing an Iranian arms smuggler to the United States several years ago. At the same time, it cannot afford to alienate a powerful regional neighbor and major commercial partner -- especially as it seeks to prevent any further recognitions of the breakaway regions.
BASS

Wikileaks