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Wednesday, May 3
Georgian MFA: “Small Progress” on Non-Use of Force

Responding to a query, the Georgian MFA confirmed that “small progress” has been made on the non-use of force document at the Geneva International Discussions (GID), but said that “fundamental differences in participants’ approaches” remained, preventing “any significant progress.”

The statement follows a comment by Russian Foreign Minister Sergey Lavrov, who expressed confidence “that in the foreseeable future it is realistic to sign a legally binding document on non-use of force” while speaking at a press-conference during his April 18-19 visit to Abkhazia.

Lavrov’s statement followed the 39th Round of GID held on 28-29 March. Commenting on the meeting in his April 10 interview, Gunther Bachler, who represents the OSCE at the GID, said the round “was extremely fruitful; we came close to a non-use of force statement, there are talks between Russia and Georgia about that.”

Background: Non-Use of Force Discussions

The Geneva International Discussions is a multilateral mediation forum co-Chaired by the EU, OSCE and UN, which was created after the 2008 war to address security and humanitarian issues. It involves representatives from Tbilisi and Moscow, as well as Tskhinvali and Sokhumi (both de facto authorities and the authorities ‘in exile’ backed by Tbilisi) in their individual capacities.

The non-use of force (NUF) commitment is one of the key issues on GID agenda. The August 2008 ceasefire agreement, as well as the September 2008 document on its implementation modalities, refer to the need for such a commitment, accompanied by unspecified International Security Arrangements (ISA).

Ideally, Tbilisi would like to see the binding non-use of force commitment from Russia guaranteed by an international peacekeeping – or, as a minimum, peace monitoring - deployment. Since Russia recognized the independence of Abkhazia and South Ossetia in 2008, the European Union Monitoring Mission (EUMM), originally intended as a core part of ISA, is not allowed to enter either of these breakaway regions.

Regarding NUF, former President Mikheil Saakashvili, speaking at the European Parliament took the unilateral obligation not to use force in 2010. Following the change of Parliament majority, this commitment was reiterated by the legislature in March 2013, and yet again after the general elections in December 2016. The commitment not to use force also forms a part of Georgia’s Association Agreement with the European Union.

The 2010 statement by President Saakashvili was reciprocated by the Sokhumi and Tskhinvali leaderships, which has no legal weight from Tbilisi’s point of view. Importantly, Russia, which invaded Georgia militarily in 2008 and stations its troops in both regions, did not reciprocate. The recent formal amalgamation of the Abkhaz and South Ossetian troops under Russian command makes the NUF statement from Russia ever more relevant in Tbilisi’s eyes.

In the framework of the GID, Georgia has insisted that Russia make a binding NUF pledge. Russia refuses, claiming it is not a party in the conflict. Instead, Moscow wants Tbilisi to sign non-use of force treaties with Sokhumi and Tskhinvali, which in Georgia’s eyes would amount to formal recognition of the two territories.

Failing to reach a consensus on this point, the co-Chairs of GID put forward a text of a non-use-of-force declaration, which has been considered since early 2012. Such a declaration need not be signed, but could be made in the name of participants by the GID co-Chairs.

Since the GID participants are engaged in their “personal capacity” rather than as official actors (to sidestep the matter of status of the Abkhazia and South Ossetia representatives), it is unlikely that such a statement can be considered as legally binding. Tbilisi thus insisted, that to agree to such a declaration, it had to be preceded by Russia’s formal pledge not to use force against Georgia. (

National Bank of Georgia increases policy rate

The Monetary Policy Committee of the National Bank of Georgia met on May 2, 2017 and made the decision to increase the refinancing rate by 25 basis points to 7.0 percent, the official webpage of Georgia’s National Bank reports.

The decision is based on the macroeconomic forecast, according to which, due to the supply side pressures, the inflation is expected to be above its target rate during 2017. Nevertheless, once the effect of one-time factors affecting CPI inflation is exhausted, the inflation rate is expected to decline at its target level in 2018. Moreover, by increasing the policy rate, the National Bank of Georgia intends to control the inflation expectations. Other things equal this year, a further increase in the policy rate is not expected. With the elimination of the impact of the aforementioned one-time factors, the inflation will start declining and will stay close to the target in the medium term; the policy rate in the medium term is expected to gradually decrease to its neutral level.

This year, the factors affecting the demand side of the consumer prices are still weak, although the economic activity has improved. According to preliminary estimates, economic growth in the first quarter is 5.0 percent. Following the economic recovery of the main trading partners, the external demand has surged, significantly increasing the revenues from tourism and exports. Moreover, compared to the previous year, the volume of remittances has grown.

The NBG will continue to monitor the developments in the economy and financial markets and will use all available instruments at its disposal to ensure the price stability.

The new monetary policy rate will be effective from 4th of May, 2017.

The next meeting of the Monetary Policy Committee will be held on June 14th, 2017. (DF watch)