IMF and Georgian opposition warn of repercussions for sanctions non-compliance

Former prosecutor general Otar Partskhaladze’s Georgian citizenship is in the process of being revoked, after the National Bank rescinded its commitment to applying Russia-related sanctions to Georgian citizens. International organisations have warned that this may affect financial support programmes in the country. 

On Wednesday, three vice-governors at Georgia’s National Bank resigned after the bank announced that international sanctions would only be applied to Georgian citizens or legal entities if a Georgian court found them to be guilty on relevant charges. 

The move came a day after the ruling party chair criticised the National Bank’s announcement that it would observe international sanctions; an announcement understood to refer to Otar Partskhaladze, a former prosecutor general whom the US State Department had recently announced sanctions against. 

The National Bank’s decision prompted sharp responses both within and outside the country. After at least six of the country’s largest commercial banks announced their intention to observe international sanctions in defiance of the National Bank, the IMF and United States Department of State both suggested that a failure to observe sanctions could prompt repercussions. 

The International Monetary Fund’s (IMF) mission head for Georgia on Wednesday told BMG that the organisation had concerns regarding the National Bank’s announcement, and would consider its ‘potential implications’ for IMF programmes in the country. In June 2022, the IMF approved a three-year IMF $280 million financial support programme to Georgia. 

Concerns regarding the potential impacts on the country grew after Georgian TV channel Formula quoted the US Department of State as warning that individuals who conduct bank transactions with Partskhaladze were putting themselves at risk of sanctions. 

Several opposition groups in Georgia, including the United National Movement (UNM), Strategy Aghmashenebeli, and Lelo, have warned that the entire Georgian banking sector may become vulnerable to international sanctions and the possibility of frightening off international investments.

‘There is a very big danger of our international partners imposing serious sanctions on our banking system’, warned Lelo chair and former banker Mamuka Khazaradze on 20 September.

Georgia’s Justice Ministry also announced on Wednesday that it had ruled that Partskhaladze, a dual Georgian-Russian citizen, would lose his Georgian citizenship pending the approval of President Salome Zurabishvili. At the time of publication, Zurabishvili had not commented on the case. 

The Justice Ministry’s decision came days after Zurabishvili challenged the government as to why Partskhaladze still held a Georgian passport after acquiring a Russian one, and over seven months after Georgian media reported the issue. Georgian citizens may only hold dual citizenship if granted permission by the country’s president. 

Close ties to government

The National Bank’s U-turn raised questions in Georgia regarding Otar Partskhaladze’s proximity to the government, as well as others relating to Georgia’s financial policy and its commitment to Russia-related international sanctions. 

On 20 September, hours before the Justice Ministry concluded Partskhaladze should not hold Georgian citizenship, the ex-official transferred his real estate assets to his son by paying additional fee for an expedited procedure. At least 13 immovable assets were transferred, including land, hotels, and apartments.

The same evening, Georgian TV channels Formula and Pirveli reported that unidentified men believed to be Otar Partskhaladze’s bodyguards obstructed their work and stole some of their equipment in Tbilisi. 

Partskhaladze, who was in office for less than two months in 2013 before quitting over allegations of earlier criminal records, was sanctioned by the US on 14 September. He was previously one of 12 Georgians that Ukraine’s anti-corruption agency recommended be internationally sanctioned for their alleged ties to Russia, alongside former Georgian PM Bidzina Ivanishvili. 

[Read more on OC Media: Ukraine calls for sanctions against Bidzina Ivanishvili] 

In its announcement, the US Department of State and the Treasury referred to Partskhaladze as a ‘Georgian-Russian oligarch whom the FSB has leveraged to influence Georgian society and politics for the benefit of Russia’. 

A number of opposition figures including Levan Khabeishvili, the chair of Georgia’s largest opposition party, have suggested that the commitment to not impose sanctions on Georgian citizens unless found guilty by a Georgian court is intended to protect Ivanishvili. 

The ruling party’s billionaire founder, who is frequently said to maintain ‘informal rule’ over Georgia, has been recommended for sanctioning by Ukraine and the European Parliament, and accused of retaining close ties to Russia. 

Georgian Government has created official mechanism within Georgian jurisdiction to avoid international #sanctions against Georgian nationals spying on behalf of Russia or influencing Georgian politics in the interests of Russia. The order of the National Bank is a shield for…

— Giorgi Gakharia (@GakhariaGiorgi) September 21, 2023

While ruling party officials have in recent years referred to Partskhaladze as a ‘private citizen’ unconnected to the current government, they claimed after the announcement of sanctions that the US authorities had failed to specify his wrongdoings. Party chair Irakli Kobakhidze additionally argued that as a Georgian national, Partskhaladze should enjoy ‘presumption of innocence’ within the country until proven guilty. 

In 2018, the former Georgian PM and billionaire, Bidzina Ivanishvili, confirmed Partskhaladze was a friend of his family while denying he was his personal friend. In 2016, the former prime minister announced that his son, Bera Ivanishvili, was godfather to Partskhaladze’s grandchild.

On Tuesday, the opposition Lelo party stated that the National Bank’s announcement confirmed that ‘state institutions have been completely sabotaged’. 

‘If it weren’t for Bidzina Ivanishvili’s personal instruction, no one would have dared to change the decision of the National Bank’, read the statement. 

‘In order to protect the interests of a person accused of carrying out the interests of the intelligence service of a state hostile to the state of Georgia, [the National Bank] endangers the banking system of Georgia and its reputation, as well as all citizens who use this system. This step is tantamount to sabotaging the interests of the country’.

Otar Partskhaladze’s name reappeared multiple times after his resignation, as reports by Georgian media and watchdog groups accused him of a physical assault on Georgia’s Auditor General, receiving questionable government tenders, and owning unexplained wealth, amongst other accusations.

In 2017, the European Court of Human Rights deemed ‘sufficiently credible’ the allegation that Partskhaladze had improperly pressured former Georgian Interior Minister Vano Merabishvili, who was in pre-trial detention at the time.

Fistfights and no-shows

The National Bank’s U-turn sparked a significant fallout, including a fistfight in parliament on Wednesday after opposition MPs were denied the opportunity to discuss the matter. Georgia’s State Security Service also announced that it would launch an investigation into the US State Department’s allegations against Partskhaladze. 

President Zurabishvili also called on Natia Turnava, the Acting Governor of the National Bank of Georgia, to resign, alleging that she had bowed to pressure from the ruling party. Turnava refused to quit and responded by accusing the President of exerting pressure on Georgia’s National Bank.

On 21 September, Zurabishvili verbally rescinded candidates she had previously fielded for the National Bank’s board of governors. The parliamentary majority confirmed two candidates who did not show up to the hearings.