Georgia’s reluctance to freeze the assets of a former official accused by the US of being a Russian agent is further testing Tbilisi’s ties with the west.
The US State Department earlier this month added Otar Partskhaladze, who briefly served as Georgia’s chief prosecutor, to its sanctions list, citing help he had allegedly received from Russia’s FSB security service in becoming a Russian citizen and saying that, in return, he had agreed “to influence Georgian society and politics for the benefit of Russia”.
After initially backing the asset freeze that the sanctions entail, Georgia’s central bank changed its compliance rules, effectively shielding Partskhaladze. Three senior bankers resigned in protest at the changes. A virulent domestic debate ensued on why the ruling Georgian Dream party was seemingly prepared to protect figures linked to its founding oligarch, Bidzina Ivanishvili, at the expense of alienating its international partners.
“No one believes that the central bank is independent. It’s part of the government,” said Alexandre Rakviashvili, an economist and MP for the libertarian political party, Girchi. “Partskhaladze is a very important person in our country,” he added. “He was prosecutor-general and has close ties with Ivanishvili.”
In 2016, Ivanishvili said that his son Bera was godfather to Partskhaladze’s grandson. While he no longer has a formal political role, Ivanishvili is still controlling Georgian Dream, analysts say. The oligarch accrued much of his wealth in 1990s Russia and from his 1 per cent share in Russian energy giant Gazprom. His wealth is estimated at $6.2bn, about one-third of Georgia’s entire GDP.
Ivanishvili did not respond to a request for comment.
Partskhaladze, appointed by Georgian Dream, resigned in 2013 after just six weeks in office as chief prosecutor, amid revelations that he had a criminal record in Germany. He made a written statement that he was found guilty by a German court for having a “verbal altercation” with a policeman. He was charged in 2018 for assaulting the former head of Georgia’s audit body. In 2021, Partskhaladze was acquitted of the allegations by Tbilisi City Court.
The State Department described Partskhaladze as a “Georgian-Russian oligarch” who “routinely travels to Russia” and obtained a Russian passport with the help of the FSB. Two Russian management consulting companies partly owned by Partskhaladze were also added to the sanctions list.
Partskhaladze could not be reached for comment.
The National Bank of Georgia’s U-turn came soon after Georgian Dream chair Irakli Kobakhidze publicly warned against freezing Partskhaladze’s assets. The bank changed its rules on sanctions compliance, stating that assets of Georgian nationals would be frozen only if they were indicted by local courts.
Natia Turnava, the central bank’s acting president, defended the decision and said it was a “better way” of implementing international sanctions.
“We found out that there might be some gaps and non-compliance between local legislation and the mechanism of automatic implementation of sanctions,” Turnava told the Financial Times. She said the legal framework “may need some fine tuning with regards to Georgian citizens”.
In July, the IMF delayed its approval of the second tranche of a $289mn loan, citing concerns about changes to the National Bank’s management structure. Turnava confirmed that the IMF had suspended the programme and said that additional questions had been raised after three of the bank’s vice-presidents resigned.
The political atmosphere in Georgia remains tense as the nation awaits Brussels’ recommendation in a few weeks on whether to grant the country EU candidate status, as it did last year for Ukraine and Moldova. EU concerns over democratic backsliding, corruption and oligarchisation consigned Georgia to the slow lane of accession, with the European Commission granting it only the “conditional perspective” of being granted candidate status dependent on it passing reforms.
Instead of focusing on judicial and economic reforms, authorities have launched a bitter campaign against an alleged pro-western plot to topple the government. Last week, the country’s intelligence service announced without providing evidence that they uncovered coup plans by former officials who had served under pro-western president Mikheil Saakashvili and a commander currently fighting against Russia in Ukraine.
“They do this all the time when there’s a crisis in the country,” said Eka Gigauri, executive director of Transparency International Georgia. “The government creates stories like this before elections, for example, and says this or that western country, or Ukraine, are helping people destabilise the country. It’s a story aimed at sustaining their supporters.”
Still, the public remains largely pro-western, with latest polls showing 90 per cent of respondents in favour of EU integration.
Georgian Dream came to power in 2012 as part of a coalition that ousted Saakashvili, whom they have incarcerated since his return to the country in 2019, with the former leader decrying detention conditions and staging multiple hunger strikes that have left him emaciated.
Unlike most other EU candidate countries, Georgia has refused to join western sanctions against Russia following its full-scale invasion of Ukraine last year. Instead it has resumed direct flights between Tbilisi and Moscow, welcomed Russian émigrés and sought to push through a Russian-style foreign agents law that would target NGOs and media critical of the government.
“It seems that Georgian Dream has to pretend to move forward with the EU bid because the population is so pro-EU,” says Sonja Schiffers, South Caucasus office director at the Heinrich Boell Stiftung, a German think-tank. “They can’t openly turn back on Europe without risking large protests, but so much of what we see doesn’t help their EU bid at all.”
