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RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSI #0227/01 0391414
ZNR UUUUU ZZH
R 081414Z FEB 08
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC 8850
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 TBILISI 000227 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PHUM ECON KDEM GG
SUBJECT: GEORGIA BI-WEEKLY UPDATE February 8 
 
¶1. This cable contains current items of political, 
economic, and social interest concerning Georgia during the 
weeks of January 26-February 8. 
 
New Governors Appointed 
----------------------- 
¶2. On February 4, President Saakashvili replaced three regional 
governors.  Ramaz Nikoleishvili, the former chief of the 
investigative department at the Tbilisi Financial Police, replaced 
Mikheil Svimonishvili as governor of Guria; Tsezar Chocheli, MP and 
founder of the Natakhtari brewery and soft drinks company, replaced 
Vasil Maghlaperidze as governor of Mtskheta-Mtianeti, and Lado 
Vardzelashvili, former deputy culture minister, replaced Lado 
Gegelashvili as governor of Shida Kartli.  Chocheli's nomination has 
already come under fire from the opposition, who claim that 
Natakhtari provided significant financial support to Saakashvili's 
campaign in the recent election. Chocheli insisted that Natakhtari 
has never financed any political parties.  All the new governors 
were presented to their new offices on February 5. 
 
Bezhuashvili to Head Intelligence Unit 
-------------------------------------- 
¶3. In a surprise move shortly after his departure as Georgia's 
Foreign Minister, Gela Bezhuashvili accepted the post of Head of the 
Foreign Intelligence Unit.  The unit, which previously was a part of 
Ministry of Internal Affairs, will be turned into a separate agency 
reporting to the President. 
 
Softening Georgian Statements toward Russia? 
-------------------------------------------- 
¶4. Recent statements by Georgian officials have led many to predict 
an improvement in relations with Russia.  In his inaugural speech on 
January 20, Saakashvili said "we should reach out the hand of 
cooperation to Russia.  We should be friends, we should be closer." 
Following what he called a constructive meeting the same day with 
Russian Foreign Minister Lavrov, Saakashvili said he would soon send 
the Georgian Foreign Minister to Russia.  On January 22 then-Foreign 
Minister Gela Bezhuashvili said Tbilisi would develop a "road map" 
in the next few weeks to improve Georgian-Russian relations.  Prime 
Minister Gurgenidze said on February 6 that Russian construction of 
a road in Dagestan could create a new tie with Georgia and was a 
sign of improving relations.  Gurgenidze could have spun this news 
much more negatively, because in announcing the road Russian 
President Putin reportedly cited the need to be able to move tanks 
in the region as a key reason for the road.  Gia Karalashvili, head 
of the Georgian MFA's Russian Section, told us his office was 
currently focusing on resolving the Russian ban on Georgian wines 
and agricultural products, renewing issuance of Russian visas and 
transportation, and other practical issues. 
 
New Commission on Property Rights Protection 
-------------------------------------------- 
¶5. Responding to criticism about the government's handling of 
property rights, President Saakashvili has set up a special 
commission that will deal with property-related disputes. 
Saakashvili announced that the commission would be presided over by 
Georgia's Public Defender Sozar Subari -- widely seen as an 
independent, if not anti-government, figure -- and would be composed 
of prominent public figures and politicians, including members of 
the opposition.  The commission will be authorized to hear all cases 
on private property confiscation and will make binding decisions. 
Despite the President's statement about including the opposition, 
indications are the opposition is not interested.  The opposition 
New Rightist Party stated that Subari would serve merely as a 
"facade" for Saakashvili, who wants to "create the illusion" that 
the commission will be objective.  The New Rightists will boycott 
the commission, which they described as a "comedy." 
 
Railway Privatization Creates Controversy 
----------------------------------------- 
¶6. Privatization of Georgia's railway has been a subject of 
controversy since it was struck off the list of strategic state 
assets last July, making it legally eligible for privatization. 
Last year a quickly concluded privatization deal with UK-based 
Parkfield Investment, Ltd failed for unpublicized reasons. 
Parkfield was controlled by anonymous backers whose identity was 
never made clear.  In October 2007 the government once again invited 
companies to express interest towards Georgian Railway.  According 
to the Economic Development Ministry, five companies submitted bids. 
 Bidders include a U.S. company, Stratton Holdings, the parent 
company of U.S. investment management firm Stratton Management 
Company; East Capital, a Swedish investment firm (identified as 
American by the GOG); Center Invest Capital Partners (a Russian firm 
which seems to have been created specially for the purpose) and 
Capital Investment AG, a Swiss-registered firm.  The only Georgian 
company to place a bid is the Silk Road Group, whose business 
interests include rail transport, shipping and pipelines.  The 
opposition has been quick to denounce the tender, objecting to the 
privatization of strategic state assets.  The New Rightist Party 
warned potential investors not to enter into any agreement with what 
it considers to be an "illegitimate government", thereby risking 
having their deal annulled if the opposition comes to power. 
 
 
TBILISI 00000227  002 OF 002 
 
 
Georgia's Banking Sector to See New Players 
------------------------------------------- 
¶7. In an annual report, the National Bank of Georgia (NBG) announced 
that the net profit of 19 banks operating in Georgia had grown by 
17.5 percent during 2007.  As of January 1, 2008, the total assets 
of country's banking sector had grown to 7.2 billion Georgian lari 
(about 4.5 billion USD), marking a 70.5 percent increase raise 
compared with the previous year.  According to official sources a 
number of new players are expected to enter Georgia banking sector, 
including Dabi Group of the United Arab Emirates and People's Bank 
of Kazakhstan.  HSBC is preparing to open its Georgian headquarters 
in Tbilisi later this year.  In addition, Georgian soccer star Kakhi 
Kaladze has already purchased a license from the NBG to set up a new 
bank that is reportedly to be headed by former Prime Minister 
Noghaideli. 
 
Noise around Gas and Electricity Bills 
--------------------------------------- 
¶8. Gas and electricity bills issued to the residential consumers at 
the end of January had the effect of a cold shower due to unusually 
high charges.  Opposition parties were quick to accuse the 
electrical companies and the government of ripping off consumers by 
unexpectedly increasing the tariffs.  Distribution companies flatly 
denied the accusations and explained that unusually cold weather in 
January substantially increased consumption levels.  The director of 
the Kazakh-owned gas distribution network also admitted that a 
one-time change in the billing process had made the charges look 
higher than they were: January bills covered a 45-day period instead 
of regular 30.  While he argued that this was because meter readers 
did not want to bother people during the New Year holidays, another 
plausible explanation is that the delay was so that people would not 
receive high bills during the election campaign. 
 
Human Rights Watch Criticizes Government 
---------------------------------------- 
¶9. On January 31, Human Rights Watch released its annual report 
which claimed that the Georgian government's approach to human 
rights is "leading Georgia away from international standards and 
represents a gamble with freedom."  The report focuses on November 7 
events, stressing that the police crackdown on demonstrators caused 
a "serious human rights crisis," and claims that a dominant view is 
emerging within the government that "short-term, minor sacrifices in 
human rights are justifiable to build a stronger state, which can 
better protect human rights in the long term."  The report stresses 
that the state of emergency and subsequent media restrictions had a 
negative impact on the pre-election campaign.  The report also cites 
poor prison conditions, restriction of fair trial, infringement on 
private property rights, and lowering the age of criminal 
responsibility from 14 to 12.  Commenting on the report, ruling 
party MP Davit Kirkitadze said in an interview that a commission to 
investigate the November 7 crisis will be established after the new 
parliament is elected in the spring. 
 
TEFFT