By Eka Janashia (04/15/2015 issue of the CACI Analyst)
On April 3, former Defense Minister Irakli Alasania claimed that Georgia’s government thwarted a crucially important defense deal with France likely due to Russia’s objection to Georgia’s enhanced defensive capabilities.
According to Alasania, French President François Hollande agreed during his visit to Tbilisi last year to sell air defense capabilities to Georgia. The move marked the end of an arms embargo informally imposed against Georgia after the 2008 August war as western partners hesitated to sell defensive weapons to the country.
The government worked out subsequent proposals and tasked Alasania with striking an initial deal – a non-binding memorandum of understanding (MoU) – with the French side. He arrived in Paris in late October, but was just before the signing of the document deprived of his mandate to do so. Alasania asserts that Billionaire Bidzina Ivanishvili decided to prevent the deal under pressure from the Kremlin.
The MoU envisaged the conclusion of a final agreement at the end of March, which would aim to reinforce Georgia’s air defense system and shield the country from attacks of fighter aircraft and even short and medium-range ballistic missiles. The deal also foresaw specific training to familiarize the Georgian servicemen with the system. Importantly, the deal would be paid for through a long-term loan, which would not have been painfully reflected in the state budged, the former minister said.
As Alasania refused to comply with the “illegal instruction,” of the “informal ruler [Ivanishvili],” the ministry’s general staff officials were arrested to raise the pressure on him. Nevertheless, Alasania signed the document in order not to lose the chance that “opened up for Georgia after many years of embargo.”
Shortly thereafter, he was sacked from the post of Defense Minister and his Our Georgia-Free Democrats (OGFD) party left the Georgian Dream (GD) ruling coalition. Yet Alasania has not disclosed the MoU-related sensitive details until now (see the 11/11/2014 issue of the CACI Analyst).
The government made efforts to reject Alasania’s allegations. On the same day, PM Irakli Gharibashvili indicted him for exposing state secrets and the Ministry of Defense released an interview with the French ambassador saying that discussions on military cooperation between Georgia and France military, which started last year, were still underway.
However, it remains a fact that the final agreement, allegedly envisaged in the MoU, was not signed at the end of March, 2015. OGFD requests the formation of an ad hoc parliamentary commission with access to classified information to cast light on the issue and confirm or deny the assertions that Alasania made on April 3.
It seems that Alasania has been awaiting the government’s failure to meet the deadline to raise the matter. However, there could be another reason why he raised the criticism at this time.
On April 1, the U.S. NGO International Republican Institute (IRI) published the results of public opinion research conducted throughout Georgia on February 3-28, 2015. The survey mapped the foreign and domestic policy preferences as well as the ratings of political parties and their leaders.
A clear trend unveiled by the polls is the waning popularity of GD. In local elections held in June 2014, the coalition garnered just over 50 percent of the votes, while according to IRI research, the likely number of GD voters has dropped to 36 percent. It is followed by United National Movement (UNM) with 14 percent, OGFD with 10 percent, Labor Party with 6 percent, Alliance of Patriots of Georgia and Democratic Movement–United Georgia with 5 percent each. Alasania’s favorability rating is 57 percent, with a disapproval rating at 34 percent, while the corresponding figures for PM Gharibashvili are 56/39 percent respectively. Alasania is the most favored candidate among the opposition leaders.
In terms of foreign policy priorities, the poll showed that Georgians strongly support their country’s integration with Euro-Atlantic structures. 85 percent of the respondents favor Georgia’s membership in the EU and 78 percent support its accession to NATO. 76 percent of Georgians deem the Russian Federation as a threat to the country while 88 percent think Russian aggression toward Georgia is ongoing or likely to resume.
Another striking trend disclosed by the survey is the apathy and skepticism that has been growing among the population since 2014. People are less optimistic about the future than a year ago. 55 percent of the respondents think Georgia is on the wrong track, and only 25 percent approve the country’s current trajectory.
Although GD, as well as some experts and politicians, expressed skepticism regarding the polls, it might be a mistake to ignore the overall context that the survey has outlined. What is a warning for the ruling coalition might be an opportunity for the opposition parties. Talking about the air defense affair, while most Georgians fear continued Russian aggression, is beneficial to Alasania and OGFD. This shift in opinion is also reflected in the declining support for GD and the growing popularity of Alasania.
By Eka Janashia (04/01/2015 issue of the CACI Analyst)
The struggle for power between the Georgian Dream (GD) ruling coalition and opposition parties, as well as within GD itself, is gradually gaining impetus at all levels of governance against the background of a slowing economy and corruption cases.
At the end of 2014, the coalition underwent serious changes affecting senior and mid-level government officials, as well as the cadre of the party’s leadership. The alterations were allegedly due to Georgia’s “Grey Cardinal” Bidzina Ivanishvili’s loss of confidence in his protégé PM Irakli Gharibashvili, and an ensuing attempt to replace the PM’s trustees with those of Ivanishvili at tactically important positions, including the GD’s Executive Secretary, the Minister of Internal Affairs, the heads of the Special State Protection and State Security Services, and the Deputy Minister of Regional Development and Infrastructure. The latter post was taken by the billionaires’ close associate and former head of his Cartu Bank, Nodar Javakhishvili.
Javakhishvili recently confronted his boss, Minister David Shavliashvili, over the failure to deal with disorders in road tenders and financial fraud schemes. While opposition parties have frequently pointed out the corruptive involvement of Gharibashvili’s cronies in state tenders, the indictment aired by the deputy minister cast the case in a different light and could be perceived as another attack on the PM.
This trend is coupled with GD’s loss of majority in a regional legislative body – the Supreme Council (SC) of Adjara Autonomous Republic. Since the October 2012 parliamentary elections, GD has held 13 seats versus the opposition United National Movement’s (UNM) 8 in the 21-member SC. In November 2014, the GD lost two seats in the SC after the Free Democrats’ (FD) departure from the coalition, leaving GD with 11 seats – still sufficient to override the oppositions’ votes. However, in February, the chairperson of the SC’s human rights committee, Medea Vasadze, quit and deprived the coalition of a clear majority.
Moreover, on February 20, two GD members supported the UNM’s initiative to sack the SC’s vice speaker Davit Batsikadze and the chairperson of its financial and economic committee Alexandre Chitishvili, both GD members.
The proponents of the initiative accused the officials of failure to carry out their duties. In turn, GD accused UNM of “revanchism” and termed the support from its own members for the proposal a “traitorous action.” PM Gharibashvili said the two SC members had been covertly cooperating with UNM and the move would be rebounded “very strictly.”
While GD has failed to keep a steady majority in Adjara, it has locally become involved in scandalous corruption cases. In February, the head of Tbilisi City Hall’s supervision service, Jokia Bodokia, was detained on bribery charges. According to the Prosecutor’s Office, Bodokia received a US$ 50,000 bribe from a construction company in exchange for a hotel construction permit in Tbilisi. The opposition asserted that vice Mayor Alexander Margishvili and even Tbilisi Mayor Davit Narmania were involved in the deal.
Prosecutors claimed that an employee of the mayoral office, Mikheil Kviria, also accepted a US$ 10,000 bribe from Indian and Iraqi citizens in return for a land purchase permit near Tbilisi. Meanwhile, Margishvili resigned without any explanation, and in March, the administrative head of the mayoral office, Reno Chakhava, and his deputy Mariam Shelegia also quit their posts.
Narmania abruptly announced the establishment of the Tbilisi Entrepreneurship Support Center (ESC) and appointed Margishvili head of the agency, which will be tasked with fostering investor activities and developing entrepreneurial skills.
Transparency International Georgia (TIG) slammed the initiative, arguing that a number of other structures with the same tasks and functions are already operating across the country. Also, the two million GEL envisaged for the agency’s budget exceeds the funding for the Business Ombudsman’s office by a factor of four and is at odds with the “tighten belts” policy announced by the government. According to TIG, Margishvili’s appointment raises doubts as his reasons for resigning from the post of vice-mayor remain unclear.
These episodes add to the coalition’s trouble in strengthening its political power attain credibility for its policies. One of the most apparent reasons is Ivanishvili’s rule behind the scenes, coupled with his changing attitudes towards previously favored persons. Ivanishvili’s criticism against President Giorgi Margvelashvili, PM Gharibashvili, and Mayor Narmania, indicates that he is no longer satisfied with their performance. His endeavor to introduce new trustees in the government ramps up the competition for influence, thus enlarging rifts within the coalition and creating space for inefficiency and corruption. GD’s retreat in a major regional legislative body and the murky business in Tbilisi City Hall might reflect GD’s incapacity to coordinate its heterogeneous coalition to cope with Georgia’s political and economic situation.
Finally, GD’s partition gives the opposition forces a new window of opportunity, which the UNM has already started to exploit. At the March 21 demonstration, the party’s leaders declared permanent protest rallies in order to achieve the government’s resignation and possibly even early parliamentary elections. Although the party does not enjoy much popular support, it seems determined to fight for regaining public trust.
By Eka Janashia (03/18/2015 issue of the CACI Analyst)
Georgia’s national currency, GEL (Lari) has lost 29 percent of its value against the US$ since November last year and, after a brief recovery, has continued depreciation until present. On February 24, the GEL saw its largest drop reflected in a single-day 3 percent fall. The Government pledged to present a “currency stabilization plan” for March 5 but failed to match the vow.
The implications of Georgia’s currency devaluation have become a major provenance for political speculation, public discontent, and concerns among domestic and foreign businesses.
Until the end of February, the government’s economic team kept calm regarding the depreciation of the GEL, largely echoing former Prime Minister Bidzina Ivanishvili’s assertion that he was completely satisfied with the work of the government and the National Bank of Georgia (NBG), instead linking the currency devaluation to external factors. “Nothing special is happening, the Lari is doing very well,” he claimed in January.
However, in response to public concerns after the GEL lost 3 percent of its value in a single day on February 24, Ivanishvili blamed the head of NBG Giorgi Kadagidze for idleness. “Kadagidze, who was appointed by the United National Movement [in 2009], led us to the crisis of the national currency with his inaction and wrong decisions” since under the constitution, the president of NBG is responsible for preventing undesirable developments, Ivanishvili said. After this statement, some ministers and the GD ruling coalition representatives also began disparaging the NBG’s work.
Kadagidze refused to engage in political debates but in response termed the GD attacks a “deliberate slanderous campaign against NBG” and reminded the public about the chronology of the events.
In 2013, Kadagidze warned the government that the projected 6 percent growth was overoptimistic and suggested a downward revision. Indeed, economic growth that year amounted to only 3.1 percent, half of what the government intended to achieve.
Kadagidze insisted that he also advised the government to avoid uneven spending from the state budget as it would increase pressure on the currency’s exchange rate, which in late 2013 resulted in an NBG intervention by selling several hundred million US$ at the exchange market, resulting in a decline of the country’s foreign reserves from US$ 3.1 billion in October, 2013, to US$ 2.82 billion by the end of 2013.
At that time, the intervention was justified as a one-time measure, whereas the current GEL depreciation is caused by the economy’s overall failure as foreign currency inflows have plunged since 2013, Kadagidze claimed.
Georgian exports fell by 30 percent and remittances by 23 percent year on year in January. In addition, the number of tourists shrunk by 7.8 percent in January-February compared to the same period last year. In effect, the account deficit reached 9.5 percent of GDP in 2014. Kadagidze argues that filling the deficit with foreign currency reserves is “counterproductive and fruitless.”
In cooperation with the Government and the NBG, the Analytic Mission of the International Monetary Fund (IMF) studied Georgia’s macroeconomic indicators in light of the recent economic hardship. A concluding statement lists a set of external factors such as the ongoing crisis in Ukraine; the growing recession in Russia; and currency devaluations in trading partner countries as reasons for Georgia’s slowing economy. Economic growth for this year could reach only 2 percent, instead of the previously estimated 5 percent, and even this projection is under the risk, the mission said.
As a countermeasure, the IMF suggested restrictions in administrative spending and increases of specific taxes in order to eschew a further upsurge of the budget deficit. At the same time, the IMF fully supported NBG’s policy of limited intervention in the foreign exchange market, arguing that its primary task is to maintain price stability in the country and while fulfilling this mission the independence of NBG “should be preserved and respected.”
In the wake of this statement, the Georgian government vowed to reduce administrative costs and pursue a so called “tighten belts” policy. Moreover, it declared its intention to ramp up the privatization process with an aim to raise US$ 300-350 million within the next two-three months.
To this end, the government plans to sell state assets – the historical buildings of the Economy Ministry and NBG in downtown Tbilisi, government residences in Adjara and near the capital city, and shares in thermal power plants and the National Lottery Company.
Nevertheless, some economic experts and opposition political parties argue that one-time investments cannot recover the ailing economy. The former president of NBG, Roman Gotsiridze, argues that enlarged social expenses, agricultural loans, and healthcare projects make the state budget inflexible. The budget expenditure should be reduced by at least GEL 300 million, otherwise the national currency will continue to depreciate and prices will rise, which will completely destroy the country’s economy.
The United National Movement (UNM) and Free Democrats, two parliamentary opposition parties, blamed the government for lacking a clear vision how to get the country out of the crisis. UNM plans to organize a protest rally in Tbilisi on March 21 to demand the government’s resignation.
It is obvious that, after GD came into power, the country’s economic policy has been less resilient to external shocks and the government has been unable to elaborate timely and cogent policies to mitigate the adversary external impact on the economy. The government’s poor economic performance encourages protest actions from opposition parties though the anticipated political turbulence could well be exploited also by radical pro-Russian parties.
KAZAKHSTAN AND THE EEU, by Dmitry Shlapentokh
U.S. NEW SILK ROAD INITIATIVE NEEDS URGENT RENEWAL, by Richard Weitz
IS “TURKISH STREAM” A SERIOUS THREAT TO THE TRANS-CASPIAN PIPELINE?, by Juraj Beskid, Tomáš Baranec
CASA-1,000 – HIGH VOLTAGE IN CENTRAL ASIA, by Franz J. Marty
KYRGYZSTAN’S RESIGNED PROSECUTOR-GENERAL GIVES WORRYING PRESS CONFERENCE, by Arslan Sabyrbekov
MOSCOW PLEDGES TO COUNTERACT GEORGIA’S INTEGRATION WITH NATO, by Eka Janashia
ARMENIA TOUGHENS ITS STANCE AGAINST TURKEY, by Erik Davtyan
FOREIGN MINISTERS OF TURKEY, AZERBAIJAN AND TURKMENISTAN DISCUSS ENERGY AND TRANSPORTATION IN ASHGABAT, by Tavus Rejepova
By Eka Janashia (03/04/2015 issue of the CACI Analyst)
The Kremlin continues Russia's annexation of Georgia's breakaway regions and at the same time warns Tbilisi to cease its effort to integrate with NATO. On February 18, breakaway South Ossetia signed a "border treaty" with the Russian Federation, and declared its intention to strike an "Alliance and Integration" deal with Moscow shortly.
The agreement mirrors the "Alliance and Strategic Partnership" agreement inked between Moscow and Sokhumi in November, though envisions a deeper integration of the South Ossetia's defense, security, and customs agencies with those of Russia. An already signed border agreement dictates the abolishment of the border crossing point at the Roki tunnel connecting the South Ossetia to Russia.
The border eradication initiative was first aired by Vladislav Surkov, the Russian president's aide in charge of supervising Moscow's relations with the two de facto republics, on February 17, during a meeting with Abkhazia's de-facto president Raul Khajimba. "There must not be a border between us," Surkov said and added that Russia's financial support for the two breakaway regions would be upheld in the face of Russia's current economic troubles.
The border agreement between Moscow and Tskhinvali is a swift implementation of this initiative. After signing the border treaty, Russia's Foreign Minister Sergey Lavrov expressed the Kremlin's readiness to avert the "negative effect" of "never-ending attempts to drag Tbilisi into NATO."
The Kremlin's apprehension is directed towards the establishment of NATO's "Training and Evaluation Center" (TAEC) in Georgia which, in the words of Russia's permanent representative in NATO Alexander Grushko, provokes Moscow, escalates tension and worsens regional security.
At the recent NATO summit in Wales, Georgia obtained a "substantial package," which along with other supportive tools, aims to enhance Georgia's defense capabilities through launching the TAEC, which could obtain a regional dimension in the future.
As part of this policy, NATO's Deputy Secretary General Alexander Vershbow visited Georgia in January 2015. Vershbow assured that despite the Kremlin's nervous reaction towards the planned NATO-Georgia training center, the alliance will make a resolute effort to create the facility before the end of this year.
He underlined that the TAEC will be "the most visible element of a NATO presence in Georgia." While it will primarily focus on command post exercises, field exercises with participation of foreign troops as well as live and simulated trainings for allied military units committed to the NATO Response Force and Connected Forces initiative might also take place, Vershbow said. He also announced that periodic military exercises involving NATO allies and partner countries will start in Georgia this year.
The Kremlin's reaction to the high NATO official's statement was soon reflected in the border removal initiative and strict declarations on Russia's counter-measures to deal with the undesirable implications of NATO-Georgia cooperation. Zurab Abashidze, the Georgian Prime Minister's special representative for relations with Russia, commented that Moscow, Brussels and Tbilisi all are well-aware "that Georgia's membership to NATO today and tomorrow is not on the agenda" and that Georgia-NATO cooperation "in no way aims at deploying NATO military infrastructure in Georgia."
Later, Defense Minister Mindia Janelidze restated that Georgia has no plans to host a NATO military base and that only the TAEC, aiming to enhance the professionalism of Georgian servicemen and with no additional military functions, will be established. The parliamentary minority immediately slammed these official remarks. The former state minister for European and Euro-Atlantic integration issues, Free Democrat Alexi Petriashvili dubbed Abashidze's statement another proof that the country's Euro-Atlantic course is under threat. The Free Democrats, led by former Defense Minister Irakli Alasania, quit the ruling coalition Georgian Dream (GD) in November with the same motivation.
The United National Movement (UNM) party, in turn, argued that Abashidze had voiced the government's position. The party's leader David Bakradze said that instead of distancing himself from Abashidze's statement, the defense minister had justified it.
Abashidze's statement came a few days before his meeting with Russia's Deputy Foreign Minister Grigory Karasin in Prague. The Karasin-Abashidze format is the only channel for direct communication between Tbilisi and Moscow, established by former PM Bidzina Ivanishvili. The previous government led by Mikheil Saakashvili government did not engage in direct negotiations with the Kremlin and preferred dialogue in an international format with the participation of representatives from partner countries.
While Russia's anti-NATO policy hardly surprised anyone, Abashidze's statement, which the opposition interpreted as appeasing to Moscow, was unexpected and triggered doubts about the consistency of Georgia's Euro-Atlantic aspirations.
Through the border removal initiative as well as the "amalgamation agreements" with South Ossetia and Abkhazia, Russia signals that the establishment of a training center where the troops of NATO partners may hold military exercises is totally unacceptable to Kremlin. Georgia's incumbent government clearly seeks to avoid irritating Moscow, but it yet uncertain to what extent this stance will slow Georgia's NATO integration pace. However, ambiguous moves with regard to Euro-Atlantic policy not only cast doubt on Georgia's achievements at the Wales Summit, but also minimize its chances to reach any tangible success at the Warsaw Summit scheduled for next year.
The Central Asia-Caucasus Analyst is a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Washington DC., and the Institute for Security and Development Policy, Stockholm. For 15 years, the Analyst has brought cutting edge analysis of the region geared toward a practitioner audience.