VZCZCXYZ0001
RR RUEHWEB

DE RUEHSI #0867/01 1441402
ZNR UUUUU ZZH
R 231402Z MAY 08
FM AMEMBASSY TBILISI
TO SECSTATE WASHDC 9499

UNCLAS TBILISI 000867 
 
SENSITIVE 
SIPDIS 
 
H FOR CODEL WEXLER 
STATE FOR EUR/CARC 
 
E.O. 12958: N/A 
TAGS: PREL PGOV ECON PHUM OVIP GG
SUBJECT: SCENESETTER FOR CODEL WEXLER VISIT MAY 28-30, 2008 
 
May 21 Parliamentary Election Initial Analysis 
--------------------------------------------- 
 
¶1. (SBU) Your visit to Tbilisi comes just on the heels of the May 21 
Parliamentary elections, with Saakashvili's United National Movement 
easily obtaining a strong majority in the new Parliament.  These 
elections are the culmination of domestic tensions which peaked last 
fall between the dominant ruling United National Movement party and 
the diverse opposition parties.  President Saakashvili made a speech 
broadcast publicly early on May 22 where he pledged to work with 
every opposition member and faction in the new Parliament.  Local 
NGO "New Generation, New Initiative" gave us privately their 
Parallel Vote Tabulation results which gave ruling United National 
Movement 58.53% of the Party List vote.  The United Opposition, 
Christian Democrats, and Labor party also gained seats in 
Parliament. 
 
 
¶2. (SBU) Our initial analysis of election day is that the election 
administration was an improvement over the January 5, 2008, 
Presidential election.  Local Precinct Election Commission (PEC) 
members were better trained and on the whole, knew and carried out 
their responsibilities effectively.  PEC members either 
self-corrected irregularities as they came up or corrected them when 
pointed out by one of the 38 joint U.S./UK observation teams.  This 
analysis does not review the entire counting process or turn-out 
rates which will be important for any final review of the election. 
OSCE's Office of Democratic Institutions and Human Rights (ODIHR) 
monitored the elections and ODIHR, together with the Parliamentary 
Assembly of the Council of Europe, and the OSCE Parliamentary 
Assembly noted in a statement that "political stakeholders in 
Georgia made efforts to conduct  parliamentary elections in line 
with international standards, but a number of problems were 
identified which made their implementation uneven and incomplete." 
Embassy will provide updated election reporting information via 
e-mail. 
 
Context of Georgia's Strategic Importance 
----------------------------------------- 
 
¶3. (SBU) Georgia is a strategically significant country to the 
United States because of its government's commitment to democracy, 
independence from Russia, free market economic reform, control of 
corruption, NATO and EU membership aspirations, and support for the 
Global War on Terrorism.  Notably, Georgia has the third largest 
contingent of troops (2,000) serving in Iraq with coalition forces. 
The Government recently agreed to extend its commitment in Iraq and 
will deploy a follow-on brigade in December. Georgian peacekeepers 
participate in UNMIK in Kosovo and are in discussions with NATO 
about troop contributions to the Afghanistan mission. 
 
¶4. (SBU) Georgia's success or failure sends a distinct message to 
other countries of the former Soviet Union, and in the Middle East 
as well, about the wisdom of a Western-oriented, democratic, free 
market orientation. 
Additionally, Georgia sits astride the main alternative 
corridor for trade in oil, gas, and other goods to Europe 
from Central Asia and farther East.  Without Georgia's 
cooperation, no strategy for bringing additional Azeri, 
Kazakh or Turkmen oil and gas to the world market without 
passing through Russia can succeed.  These facts begin to 
explain as well why Russia is openly hostile to Saakashvili's vision 
of an independent Georgia. 
 
¶5. (SBU) Since Saakashvili took office, Georgia has 
substantially reduced the corruption that was bleeding its 
treasury dry under his predecessor.  Saakashvili famously 
fired the entire Georgian traffic police force in 2004, and 
retrained and rehired a much smaller staff which enjoys over 70 
percent confidence of the public - an unheard of statistic for 
patrol police in the former Soviet Union.  Saakashvili's Government 
has also made arrests for corruption among all levels of government 
common news as well.  As a result, government revenues are up, 
electricity flows 24 hours per day, and government investment in 
repairing and replacing infrastructure that had badly deteriorated 
since the fall of the Soviet Union has increased.  Even with these 
improvements however, public perceptions among the urban population 
endures that Saakashvili has spent public revenue on large-scale 
development projects while much of the population struggles with 
unemployment, underemployment and rising prices as a consequence of 
economic growth. 
 
¶6. (SBU) Following the sting of losing the Tbilisi vote in his 
election victory in January, Saakashivili reallocated funds from the 
military and law enforcement budgets to support large increases in 
social spending.  Saakashvili and his economic team remain committed 
to a macro-economic approach that seeks to attract investment by 
cutting taxes, eliminating tariffs and reducing red tape and 
corruption.  Their express models are Singapore and Hong Kong. 
Saakashvili intends to continue reforms in his second term,  and 
work is especially needed to create a truly independent judiciary. 
We would encourage you to commend his reform and encourage 
Saakashvili's and the ruling party's intention to introduce new 
reforms that would strengthen the Parliament and improve the 
independence of the judiciary. 
 
NATO - Bucharest Aftermath: 
--------------------------- 
 
¶7. (SBU) Although Georgia did not receive a Membership Action (MAP) 
at the NATO summit in Bucharest, top Georgian officials lauded the 
results as a major success, pointing to language in the April 3 
summit communique that Georgia and Ukraine "will become members of 
NATO."  In a broadcast from Bucharest, a visibly pleased President 
Saakashvili termed the document a "crossing of the Rubicon by 
Georgia," in which NATO members in support of Georgia had prevailed 
in a "life and death struggle" against the skeptics.  Saakashvili 
said that while MAP is "a pledge that if you pass through the action 
plan well, you may become a member of NATO," the communique is a 
"direct commitment by NATO that Georgia and Ukraine will become 
members of the alliance."  Saakashvili hopes that Georgia would be a 
member of NATO well before the end of his presidential term in five 
years.  The next step is a review of Georgia at the NATO Ministerial 
in December, and one area highlighted by the Bucharest Summit is the 
importance of the Parliamentary elections to Georgia's bid. 
 
¶8. (SBU) Georgian popular support for moving toward NATO is some 78 
percent, and initial reaction from the Opposition and the Georgian 
media focused on the decision not to give Georgia MAP, which was 
reported earlier than the release of the communique.  Several 
opposition party leaders blamed the Georgian government for losing 
MAP due to a failure to fulfill commitments to democracy. 
 
Economy and Public Discontent Both Grow 
--------------------------------------- 
 
¶9. (SBU) Recent political problems have some economic roots. 
Inflation has made many staple food and consumer items more 
expensive for all Georgians.  Only a wealthy few are able to take 
advantage of the new, glittery housing developments across Tbilisi, 
despite the fact the economy grew 9.4 percent in 2006 and 12.4 
percent in 2007.  Growth will likely slow somewhat in 2008 as 
political turmoil has caused investors to hesitate. The emphasis in 
government spending has already begun to shift from infrastructure 
and defense to education and public health, as Saakashvili moves to 
enact his campaign slogan of "Georgia without Poverty." 
 
10.(SBU) In contrast, the opposition primarily blames current 
discontent with Saakashvili and his ruling party on 
injustice, rather than economic reasons.  Property owners 
were disturbed in 2007 by the government's willingness to 
evict long-term tenants from state-owned buildings, challenge 
corruptly procured ownership rights in privatized property, and even 
to destroy some buildings in Tbilisi that were allegedly built 
illegally.  Saakashvili's own unshakable belief in the rightness of 
his cause contributed to a widespread perception of aloofness and 
unwillingness to listen to outside voices, which hurt him in the 
polls.  Since the election Saakashvili has made extra effort to 
reach out to various alienated sectors of society.  For example, 
Saakashvili went to the Ombudsman's office to meet him and publicly 
announced a renewed effort to protect Georgians' human and civil 
rights. 
 
¶11. (SBU) We estimate U.S. investment in Georgia at about USD 770 
million since 2000.  The United States and Georgia signed a Trade 
and Investment Framework Agreement in June 2007.  U.S. assistance to 
Georgia in 2008 will be more than 150 million dollars, directed to 
strengthening democracy, rule of law, free markets, and energy 
security, among other 
objectives.  Georgia is 2 years into a 5 year Millennium Challenge 
Corporation compact.  Georgian officials would welcome a free trade 
agreement with the United States, which would attract investment and 
support jobs, stability, and growth in this friendly and strategic 
country. 
 
Energy 
------ 
¶12. (U) Georgia produces very little oil and gas on its territory, 
and must import most of its 1.7 billion cubic meters per year needs 
for national gas.  The country has enormous potential for 
hydroelectric power generation, however.  Major existing hydropower 
sources such as the Enguri dam and 1150 megawatt power station fell 
into disrepair after the fall of the Soviet Union and have only 
recently been rehabilitated.  New sources of hydropower are being 
developed.  Before 2004 electricity blackouts were common throughout 
the country, but now the system approaches consistent 24-hour a day 
service.  In fact, Georgia now exports electricity to Turkey, Russia 
and Azerbaijan. 
 
¶13. (U) Until 2006, Georgia was entirely dependent on Russia for 
supply of natural gas.  Since Georgia began taking political stands 
Russia dislikes, the price of gas has increased more than fourfold 
to about $270 and serious doubts have arisen about the reliability 
of Russia as a supplier.  Because of conservation, new 
hydroelectricity sources and the availability of natural gas from 
Azerbaijan, Georgia's dependence on Russia for supplies of natural 
gas is decreasing, although it still must import the bulk of its 
needs. 
 
¶14. (U) Gas from Azerbaijan is imported to Georgia via the 
Baku-Tbilisi-Ezerum pipeline, which parallels the 
Baku-Tbilisi-Ceyhan (BTC) oil pipeline.  Azeri gas is also imported 
from other sources in Azerbaijan pursuant to contracts.  In 2008, 
Azerbaijan and Georgia had difficulty reaching agreement on the 
price and amount of the latter supplies, but a temporary arrangement 
is in place until later this year.  Negotiations for a longer term 
arrangement are underway. 
 
¶15. (U) Georgia has three oil terminals on the Black Sea, to which 
oil is shipped by rail and pipeline from Azerbaijan.  The BTC 
pipeline provides an outlet for an additional million barrels of oil 
a day.  When all oil transport systems are fully operational, about 
2 percent of the world's current daily consumption of oil will 
transit Georgia.  Georgia naturally supports efforts to increase the 
flow of oil and gas across the Caspian.  It can be a good ally in 
convincing the Turkmenistan and Kazakhstan governments to cooperate 
with Western companies to increase volumes transported via the 
Caspian to regional and global markets. 
 
Conflict Regions: Abkhazia and South Ossetia 
-------------------------------------------- 
 
¶16. (SBU) Georgia's long-simmering problems with its 
separatist regions of South Ossetia and Abkhazia persist from the 
early 1990s.  Tensions with Russia have increased in the aftermath 
of Kosovo's independence, and as Georgia has moved toward NATO. 
Russia has recently taken a number of steps to strengthen its ties 
with the breakaway republics.  Georgian authorities have strongly 
protested these actions which include a unilateral lifting of CIS 
economic and military sanctions on Abkhazia and South Ossetia and 
authorizing official government contacts with the de-facto 
authorities.  Russia has also increased tension in the region by 
using its fighter jets to shoot down Georgian Unmanned Aerial 
Vehicles (UAV) and increasing the number of its peacekeepers 
stationed in Abkhazia without consulting the Georgian Government. 
We believe the Georgian government is sufficiently committed to its 
NATO membership drive that it would not jeopardize that goal by 
taking military action.  It will, however, have to resist internal 
pressure to do so. 
 
¶17. (SBU) Regaining the separatist regions lost in the early 1990's 
during intense internal conflicts is considered a national priority 
by a great majority of Georgians.  Regular reliable polling 
continues to bear this out.  The political leadership's focus on 
this goal reflects that fact.  Moreover, official U.S. policy 
supports Georgia's sovereignty and independence within its 
internationally recognized borders, which includes Abkhazia and 
South Ossetia.  We reject any parallels with Kosovo, as well. 
 
Jewish Community in Georgia 
--------------------------- 
 
¶18. (SBU) There are an estimated 10,000 Jews in Georgia. The cities 
of Tbilisi, Kutaisi, and Batumi have the largest Jewish populations, 
but emigration to Israel since the collapse of the Soviet Union has 
greatly reduced the population. Georgia is known for its tolerance 
of minority religions, and the Jewish community has good relations 
with the other major religious groups in Georgia, which has a 
history of tolerance for minority religions (the overwhelming 
majority of the population is at least nominally affiliated with the 
Georgian Orthodox Church.) The leader of the main Synagogue in 
Tbilisi is Rabbi Avilenekh Rozenblad. In a May 2008 discussion with 
embassy officers, Rozenblad said the community does not face 
problems with discrimination. Anti-semitism is rare in Georgia.  In 
April 2008, three Jewish graves near Batumi were vandalized, but 
Rabbi Rozenblad described this incident as highly unusual, saying it 
had been over a decade since there had been any similar incidents in 
Georgia. 
 
 
TEFFT