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Caucasus Report: January 24, 2002

24 January 2002, Volume 5, Number 4

NO HOLDS BARRED IN NORTH OSSETIAN ELECTION CAMPAIGN. On 27 January, North Ossetia's incumbent President Aleksandr Dzasokhov will run for a second term in a ballot from which his most important rival has been excluded. Ten days earlier, the Supreme Court of the Republic of North Ossetia-Alaniya canceled the registration of Sergei Khetagurov, who served as the republic's prime minister from 1989 to 1994, when he transferred to Moscow as deputy minister for emergency situations, on the basis of documents submitted by the local procuracy. Even before that ruling, Khetagurov, whom opinion polls suggest would have garnered over 50 percent of the vote, was practically deprived of access to the media, RFE/RL's North Caucasus correspondent reported on 14 January.

The annulment of Khetagurov's registration served to exacerbate an already tense situation. Thousands of Khetagurov's supporters staged protest demonstrations in the republic's capital, Vladikavkaz. Then on 21 January, Interior Minister Kazbek Dzantiev narrowly escaped injury when a bomb exploded near his car. In the preceding weeks, Dzantiev had repeatedly accused Dzasokhov's rival candidates of seeking to fan tensions.

Khetagurov's supporters have called for a boycott of the ballot, a move that Prime Minister Taimuraz Mamsurov criticized as not conducive to restoring calm. And members of Khetagurov's campaign staff have tried, albeit unsuccessfully, to persuade six of the remaining alternative candidates to Dzasokhov to withdraw and back his associate, Stanislav Suanov.

Dzasokhov's rating is said to have fallen even further since the court decision to bar Khetagurov from the ballot. Elected in 1998 with some 76 percent of the vote (see "RFE/RL Newsline," 19 January 1998), Dzasokhov proved unable to make good on his promises of an economic boom. Unemployment remains high, and despite Dzasokhov's energetic backing the Kremlin has not moved to implement plans for a major North-South transportation network highway that was to have brought in millions of dollars. (Liz Fuller)

WHO IS BEHIND THE INGURI PICKET? The UN's efforts to mediate a settlement of the Abkhaz conflict are in danger of being derailed, not for the first time, by a Georgian political faction (or factions) with a diverging agenda for the breakaway region.

On 19 January, shortly after the announcement that the long-awaited, UN-drafted document detailing the proposed division of constitutional competencies between Georgia and Abkhazia was virtually ready, Georgian displaced persons from Abkhazia began a picket on the border bridge over the River Inguri that marks the internal border between Abkhazia and the rest of Georgia. The picketers are demanding that either the Russian peacekeepers deployed in the conflict zone under the aegis of the CIS be withdrawn, or that they be moved north to police the border between Gali and Ochamchira raions. Gali's prewar population was predominantly Georgian. Members of Georgian guerrilla groups operating in the region have begun to mine roads leading from the border bridge to other locations in Gali.

Whether the picket was spontaneous or organized is impossible to judge; but the heads of Abkhaz parliament and government in exile which represent Abkhazia's former Georgian community have traveled to the west Georgian town of Zugdidi, temporary home to some 80,000 Georgian displaced persons from Abkhazia, to register their support for it. Parliament-in-exile Chairman Tamaz Nadareishvili, together with Temur Shashiashvili, governor of the western Georgian region of Imereti, late last year advocated issuing an ultimatum to the Georgian leadership: Either reach an agreement within six months with the Abkhaz that would enable the displaced persons to return to their homes, or give the Georgian guerrillas the green light to win back Abkhazia by force.

The picket also has the support of almost the entire Georgian political spectrum, with groups as diverse as supporters of deceased President Zviad Gamsakhurdia, the former paramilitary organization Mkhedrioni, and the newly forged National Movement headed by former Justice Minister Mikhail Saakashvili expressing their backing. Their motives in doing so are open to question, however. True, many in Georgia regard the Russian peacekeepers as serving Moscow's nefarious purpose by tacitly siding with the Abkhaz. But at least some persons or groups may have chosen to back the picketers' demands as a means of exerting pressure on President Eduard Shevardnadze.

Shevardnadze initially endorsed the Georgian parliament's 11 October demand that the Russian peacekeeping force should leave the conflict zone after its mandate expired on 31 December. But he is now arguing, as are other senior Georgian officials, that as the UN is not in a position to field an alternative peacekeeping force, the Russians should remain but be redeployed along the River Galidzga that marks the border between Gali and Ochamchira raions.

Speaking in Tbilisi on 22 January, Valeri Gelbakhiani, one of the leaders of the Aghordzineba parliamentary faction (the only faction that does not back the demand for the peacekeepers to leave the conflict zone), told journalists that he believes the Georgian leadership encouraged the displaced persons' protest at the Inguri bridge for "political aims." He did not elaborate, but presumably meant that if Shevardnadze could persuade the international community to send a substitute peacekeeping force to Abkhazia, his popularity would skyrocket.

Such reasoning inevitably leads to the question: Is the Inguri picket the second act of a drama whose first act was the incursion in October of Chechen and Georgian fighters into Abkhazia's Kodori Gorge? (Liz Fuller)

GEORGIAN PARLIAMENT APPROVES 2002 BUDGET IN FIRST READING. By a vote of 132 in favor and 21 against, parliament deputies approved the 2002 draft budget in its first reading late on 18 January, Caucasus Press reported. The revised draft set revenues at 1.39 billion laris ($646 million) and expenditures at 1.258 billion laris. Both figures are up to 10 percent higher than those envisaged in the draft that was unveiled for discussion in December and which was approved by the International Monetary Fund. But the version finally put to the vote failed to incorporate all the demands made by deputies from several factions for increased funding for specific sectors. Deputies made passage of the budget contingent on its revision in three or four months' time with a view to revising upward both revenues and expenditures. Minister of State Avtandil Djorbenadze, who had argued on 16 January against raising the original revenue and spending targets on the grounds that doing so would increase the risk of a future sequester (the fourth in as many years), nonetheless acceded to that demand.

Deputies' collective objections to the original revenue and spending targets focused on the legendary dimensions of Georgia's shadow economy, which according to presidential economic adviser Temur Basilia accounts for 40-60 percent of all economic activity. They argued that taxing the shadow economy more stringently and effectively would yield additional revenues that could, for example, be used to double teachers' salaries. Speaking at a press conference in Tbilisi on 11 January, Alliance for a New Georgia leader Irakli Gogava calculated that it should be possible to collect 140 million laris in excise duties on cigarettes, compared with last year's total of 40 million laris.

President Shevardnadze, however, in his traditional Monday radio broadcast on 21 January, criticized the demands for raising budget revenues and spending as "populist," reasoning that "the budget is the mirror of the economy" and that "we cannot demand of the budget what the country is unable [to deliver]."

It is not clear how the additional 131 million laris in expenditures will be allocated. As during the debate in late 2000 on the budget for 2001, the Defense Ministry was among the agencies that complained most vocally that its proposed budget was inadequate (see "RFE/RL Caucasus Report," Vol. 3, No. 47, 8 December 2000). The original draft budget provided just 42 million laris for the military. Defense Minister Davit Tevzadze asked for a minimum of 71 million, and the final figure was upped to 53 million, including 11 million laris to pay off pensions and wage arrears.

At a press conference in Tbilisi on 24 January, parliament Deputy Koba Davitashvvili pointed to major inequalities in the funding allocated to various regions of Georgia, and accused the government of bribing deputies to vote in favor of the budget by promising that their districts would receive additional funds. (Liz Fuller)

ARMENIA POSTS STEEP DROP IN FOREIGN INVESTMENT. The total amount of foreign direct investment in the Armenian economy shrunk by almost half last year to just under $100 million, figures from the Ministry of Trade and Industry show. Foreign investment stood at $190 million in 2000, according to official data.

But ministry officials played down the drop, saying on 18 January that two foreign companies, the Hellenic Telecommunications Organization (OTE) and Russia's Gazprom gas monopoly, accounted for a large share of the 2000 figure. Their Armenian subsidiaries did not need substantial capital investments in 2001, and officials argued that the fall in foreign investment is not significant if one excludes OTE and Gazprom from the overall statistics.

Deputy Minister of Trade and Industry Tigran Davtian said that last year's modest figures also stemmed from the global economic impact of the 11 September terrorist attacks in the United States. He said that was a key reason why the government did not secure any multimillion-dollar privatization deals with foreign investors.

In October, the Swiss company Holcim, one of the world's largest cement producers, blamed the bleak economic outlook for its unexpected decision not to go ahead with a $30 million cement factory project in southern Armenia. Analysts believe the worldwide economic downturn also played a role in the government's failure to attract any bids for Armenia's power distribution companies.

Despite the drop in foreign investment, the Armenian economy grew at a record-high rate of 9 percent last year. Davtian attributed that to a substantial increase in domestic investment. (Atom Markarian)