By Eka Janashia (08/07/2015 issue of the CACI Analyst)

On June 27, Georgia’s parliament passed, in the first reading, a bill that deprives the National Bank of Georgia (NBG) of its supervisory function of financial institutions, assigning these tasks to an independent agency.
The proposal, initiated by the Georgian Dream (GD) ruling coalition a month earlier, has faced a spate of sharp criticism not only from the political opposition but also from influential international financial institutions, civil society and the business sector. President Giorgi Margvelashvili pledged to veto the bill in case it was endorsed.
According to the amendments, a new body – the Financial Supervisory Agency (FSA) – will monitor and conduct oversight of Georgia’s banking sector and financial institutions, a function currently carried out by NBG. A seven-member board, including a representative and the president of NBG, as well as five government nominees, will run FSA after the parliamentary confirmation. The board members, in turn, will name the head of the agency, which should also be approved by the parliament.
The critics of the bill discern political motives behind the proposal, arguing that it is designed to undermine the position of NBG’s President Giorgi Kadagidze, who is affiliated with the formerly ruling United National Movement (UNM) party.
The legislation’s timing coincides with an escalating confrontation between senior GD politicians and Kadagidze. The initial attacks against Kadagidze took place in February last year, when the depreciation of Georgia’s national currency reached a dramatic level. Former Prime Minister Bidzina Ivanishvili lashed out at the NBG president, blaming him for inaction to prevent the currency crisis by using the national reserves (See 03/18/2015 issue of the CACI Analyst). Since then, Kadagidze, whose term in office will expire in February 2016, has become a frequent target of attacks from GD politicians.
Opponents of the bill also question the financial advisability of moving banking supervision from the NBG, arguing that there is no economic and financial rationale justifying the damage implied by the planned changes.
Reputable financial institutions, including the International Monetary Fund, World Bank, European Bank for Reconstruction and Development and Asian Development Bank have warned PM Irakli Gharibashvili and Parliament Speaker Davit Usupashvili that splitting the NBG’s functions will weaken “the independence and quality of banking supervision in Georgia” and challenge both stability in the banking sector and the sustainability of economic growth. In particular, they warn against empowering the parliament to appoint FSA Board members, which will undermine the principle of checks and balances practiced in the current appointment procedures for the NBG Board. Such a shift risks leading to a politicization of banking supervision, damaging its independence and autonomy, the institutions assert.
By contrast, GD argues that the amendments will grant “more independence” to the banking sector. A co-sponsor of the bill, GD MP Tamaz Mechiauri, who chairs the parliamentary committee for finances, explained that the proposal will lead to the de-politicization of NBG’s currently politicized board, which “do not reflect at all the interests of those forces, which are currently in power.”
Against the background of such statements, UNM insists that bill was initiated and backed by Ivanishvili, who aspires to obtain a “key” to the banking sector – the only sector that is not under his control.
The president’s office rejected the bill for its lack of professionalism and also lamented that the way it was elaborated contradicts Georgia’s commitments under the Association Agreement with the EU. According to the 2014-2016 Association Agenda, Georgia is obliged to boost the NBG’s independence by revising its legislation according to EU best practices and with the support of experts including from the European Central Bank. In fact, neither NBG, nor local or foreign experts, or representatives of Georgia’s business community, were invited to participate in the preparation process of the draft bill. Moreover, the sponsors of the bill failed to provide the political, financial and economic rationale justifying the prospective reduction of NBG’s functions and the need for creating a new agency.
If the bill is approved, GD will obtain real levers on the FSA Board, which will increase the perception of political motives behind the new amendments.
The president’s pledge to veto the bill will be largely symbolic since GD is well positioned to override it. The coalition holds 86 seats in parliament – 10 more than it needs to overturn a presidential veto.
Given the overall economic context – decreasing exports and investment as well as a slowdown of economic growth in Georgia, the endorsement of the bill will even further fuel speculations on the government’s agenda vis-à-vis NBG, and will complicate Georgia’s relations with financial donor organizations.

By Micha’el Tanchum (08/07/2015 issue of the CACI Analyst)

On June 24, 2015, Azerbaijan, Georgia and Romania signed a declaration committing to advance the Azerbaijan-Georgia-Romania Interconnector (AGRI) project that will transport Azerbaijani LNG across the Black Sea to Romania for re-gasification and sale in European markets. The project creates a theoretical possibility for Turkmen LNG to reach Europe through a modified use of the system. Of great geopolitical consequence, the option requires a commensurate amount of political will to implement. Independent of potential Turkmen gas exports, the furtherance of the AGRI project constitutes an important advance for Azerbaijan’s strategic policy to develop European Union stakeholders in its political sovereignty.

By Eka Janashia (06/24/2015 issue of the CACI Analyst)

Anti-western rhetoric has in recent years gained momentum in Georgian social networks, online media, and some radio and television channels. Behind the trend, observers easily detect Russian “soft power” promoted by certain Georgian non-governmental organizations (NGOs).

An “Initiative group,” committed to inform the public about actions aiming to undermine Georgia’s independence, published the report “Russian influence on the Georgian non-governmental organizations and the media.” The document lists numerous pro-Russian NGOs, founded in Georgia mostly after the Georgian Dream (GD) ruling coalition’s ascent to power in 2012, and presents a detailed analysis of their makeup and modus operandi.

According to the research, pro-Russian propaganda in Georgia’s civil sector stems from two key organizations: the “Eurasian Institute” (EI) and “Eurasian Choice” (EC), which have further spawned several other organizations and platforms.

EI is a founder of the “Young Political Scientists Club” and the “People’s Movement of Georgian-Russian Dialogue and Cooperation,” and is also a partner of “Historical Legacy” and the information portals “Sakinformi” and “Iverioni.” Historical Legacy, in turn, founded the online portal “Georgia and the World” (Geworld.ge). EI closely cooperates with various Russian organizations, including the “Caucasian Scientific Society.”

Another set of pro-Russian organizations – the “Erekle II Society” and the internet television “Patriot TV” are united under EC’s umbrella. The latter is also a partner of the “International Eurasian Movement,” led by prominent the ideologist of Kremlin expansionist policy Alexander Dugin.

While EI mainly focuses on analytical activities and outreach through organizing conferences and workshops, EC is committed to social activities by arranging protest rallies and demonstrations. The functional diversity makes the organizations effective in enhancing Russian soft power and churning anti-western rhetoric throughout Georgia.

Notably, the founders of pro-Russian NGOs as well as the participants of their conferences and meetings are mostly the same people. For example, the former public defender Nana Devdariani is a founder of several pro-Russian organizations, including “Caucasian Cooperation,” “The Center of Global Studies” and "People’s Orthodox Christian Movement.” The leader of EC, Archil Chkoidze, a person frequently quoted by Russian propaganda media, simultaneously established “Erekle II Society.”

As for cultural activities, EI conducts free Russian language courses for Georgian citizens with support of the Russian state-funded organization “Russkiy Mir.” Another Russian organization, “Gorchakov Public Diplomacy Fund,” launched the “Russian-Georgian Society Center” in Tbilisi which, among other activities, organizes tours for Georgian journalists in Russia.

In parallel, the multimedia project “Sputnik,” which is known as the locomotive of Russian propaganda media internationally, has also recently expanded its activities in Georgia. Although Georgia’s National Communications Commission deprived Sputnik of its radio broadcasting license, it has managed to secure a place in Georgia’s internet space by actively posting video materials and radio stories. Only a small share of pro-Russian NGOs in Georgia make the sources of their funding public.

The Initiative Group’s research unveils that Georgia’s pro-Russian NGOs are promoting a shift in public attitudes towards issues that were previously supported by a vast majority of the population. In a referendum held in 2008, 75 percent of the voters supported Georgia’s accession to NATO. Although the Georgian government has declared their country’s Euro-Atlantic course irreversible and that Georgia remains a committed partner to NATO and a contributor to Euro-Atlantic security, pro-Russian NGOs are cogently styling the West as an oppressor, propagating that it just needs “cheap” Georgian soldiers for its missions and will exploit the country’s territory for deployment of NATO bases and anti-missile weapons. A new referendum is therefore one of the priorities on the agenda of these NGOs.

Another component of the anti-Western discourse includes xenophobic and homophobic narratives where the U.S. and EU are depicted as destructive forces and threats to traditional social institutions in Georgia and Russia as a powerful defender of Orthodox Christianity. Most Georgians believe that Christianity is the foundation of their identity and faith the only means by which their culture can be preserved in the context of intensified globalization. Russian ideologists seek to leverage conservative attitudes among Georgians to alter the perceptions ensuing after the war between Russia and Georgia in August 2008, which strengthened the view of the Kremlin as the enemy and enhanced public support for Georgia’s Euro-Atlantic orientation. By labeling the EU as a protector of LGBT rights, Moscow seeks to change its role as an occupant into that of a generous guardian of Georgia’s historical values and identity. In this sense, the Kremlin also casts itself as a force against Islamic expansion. In 2014, EI along with the Institute of Strategic Studies, held a roundtable on the topic “Islamic ideology and security problems of the Caucasian region.” Pro-Russian NGOs promote an anti-Turkish narrative in Georgia and encourage the idea that it is better to be under Russian influence than becoming an object of the Islamic State’s expansion.

Another theme relates to the Kremlin’s “constructive” role in the resolution of Georgia’s conflicts. Proponents of this approach insist that if Georgia changes its Euro-Atlantic course and restore its strategic partnership with Russia, the latter will certainly support a peaceful settlement of the conflicts.

According to the report, the pro-Russian lineup has supporters in both the executive and legislative branches of the government. For example, the parliamentary majority member Gogi Topadze is well known for his anti-NATO statements.

While the activities of pro-Kremlin NGOs in Georgia will not easily affect the country’s foreign policy priorities, they will certainly contribute to the polarization of an already fragmented Georgian society and against the background of the country’s ongoing economic crisis, will also increase the skepticism of Western values.