On the Verge of International Scandal
17 March, 2011
On the Verge of International Scandal

Israeli Parliamentary Speaker Cancelled the visit of his Georgian Colleague

The press service of Knesset Speaker Reuven Rivlin officially confirmed that the postponement of Georgian Parliamentary Speaker’s planned visit to Israeli is directly linked to the case of Israeli businessman Fuchs and it points to a growing discord on a serious matter between Tbilisi and Jerusalem.
The statement reads that the relatives of the Israeli businessman Rony Fuchs, arrested in the Georgian Black Sea town Batumi, are convinced that the

businessman is innocent and his accusation is illegal.
It turns out the Knesset Speaker talked with his Georgian counterpart on the phone and asked him to postpone his visit to Israel due to internal and external circumstances. Rivlin’s request came in the wake of protests by private citizens and Knesset members who are outraged by the detention of Israeli businessman Rony Fuchs.
Interestingly, several days earlier, Georgian Deputy Foreign Minister Nino Kalandadze insisted that the arrest of the Israeli businessman in Georgia would not affect Georgian-Israeli relationships. She believed the incident was not likely to thwart good ties between the two countries. She did acknowledge sensitivity of the fact for Israel.
It appears that alleged violation of rights of its citizens proved to be sensitive for the Israeli Authorities, and did affect the interstate relationships despite the conviction of high-ranking Georgian officials that the case would not and should not hamper diplomatic relations. Factually, Israel treated the problem of its citizen as a matter of paramount importance and undertook serious steps in this regard.
Georgian law enforcers detained Israeli businessmen Rony Fuchs and Zeev Frenkel in Georgia on 14 October, 2010. They were accused of offering a bribe to Avtandil Kharaidze, Georgian Deputy Finance Minister. Archil Kbilashvili, lawyer of arrested Israeli businessmen assumes that the hearing of the case by Tbilisi city court is supposed to finish by the end of March. In the past we did write about our apprehension, warning the administration that the arrest of Israeli businessmen would end by an international scandal.
The story started in 1991 when the Israeli businessmen arrived in Georgia with a multi-million investment. Rony Fuchs met the Georgian Government and SakNavtobi management and requested full management of all existing pipelines in Georgia. Their company Tramex succeeded in getting the desired exclusive rights on all pipelines.
Tengiz Sigua, then a representative of Georgian Government, says that the Tramex deal was clinched despite his warning to every Georgian official structure not to issue any exclusive right to anybody. In 1996, after the entry of BP into Georgia, the Georgian Government terminated the agreement with Tramex. In response, Tramex owners appealed to London arbitrage. The dispute dragged on for years. In February of last year, the London arbitrage finally arrived to the decision, ordering Georgia to pay 97 million of compensation.
According to the investigation papers, on 15 September, 2010 Rony Fuchs and Zeev Frenkel met with Georgian Finance Minister in Istanbul and tried to bribe him with 7 million US dollars. The second meeting took place in Batumi on 14 October, 2010 confirming the initial offer of 7 million dollars. In contrast to the investigation claims, the accused businessmen tell a completely different story. They accuse the Georgian Authorities of pre-arranged provocation and point at Nika Gilauri, Georgian PM, as its mastermind.
Archil Kbilashvili, lawyer of arrested businessmen, used to state several months ago that according to the decision of the international center of dispute resolution, Rony Fuchs and Ioannis Kardassopoulos had won around 100 million payable by Georgia. This was exactly the reason of the negotiations with the Georgian Deputy Finance Minister. In fact, these negotiations were initiated by the Georgian Authorities themselves in an attempt to bargain a better deal with a lesser sum to pay (Namely, they sought something within 50-85 millions instead of the court-imposed 97 million).
Eventually, the two sides reached a 72-million compromise, with a condition that Georgia would not drag out its payment. During the negotiations involving Georgian and British lawyers they devised a text of the settlement. According to lawyer Archil Kbilashvili, Rony Fuchs was officially invited by PM Nika Gilauri to Georgia for further negotiations. Now they incriminate Fuchs in allegedly offering 7 million - out of that 72 million - to Gilauri’s deputy as a bribe. The businessmen insist that they have never proposed a bribe to deputy Kharaidze. Actually, the sum of seven million was considered to be an investment to be made in Georgia as a means to help the Georgian PM explain to the public why the Georgian State was going to pay so much money. So, according to the request of Georgian Authorities they agreed to use these seven million dollars as a PR instrument. Now the accusers claim it was a bribing attempt. It is a simple logic that anyone who wins 97 million will not bargain for any extra money.
Notably, the Georgian PM sent an official letter of invitation with his own signature to Rony Fuchs inviting him as his personal guest. The businessmen trusted the Georgian PM and came to Georgia, only to be arrested here.
According to the statement of General Prosecutor’s Office of Georgia, the investigation has the evidence that the company paid a bribe to Georgian high-ranking officials in 1990s to get 30-year exclusive rights.
However, Archil Kbilashvili, the lawyer of arrested businessmen, claims that it was not a bribe but return of money paid by Georgia in the form of investment.
The fact is that the international scandal, which we have been anticipating, is a reality now. What could spur it? Is the incidence with a single person enough to throw diplomatic relations of two countries into marshes? As one of the Georgian publications pointed out, Rony Fuchs enjoys close ties with the political elite of Israel and is even counted as a person close to the Israeli President. These things probably are enough to highlight the different angles of the situation.

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