Election Strengthens Georgian Dream's Grasp On Power

BMI View: The governing Georgian Dream coalition's candidate, Giorgi Margvelashvili, won the country's presidential election held on October 27, gaining 62.1% of the vote. While the post of president is set to become less influential after the vote, the result strengthens the hand of the Georgian Dream, while ending Mikheil Saakashvili's nine-year tenure in office.

In line with our long-held view ( see 'Election Unlikely To Defuse Political Tensions' October 14) Giorgi Margvelashvili, the candidate of the governing Georgian Dream (GD) coalition, won the October 27 presidential election with a resounding majority. With almost all votes tallied Margvelashvili had garnered 62.1% of the vote, well above the 50%+1 required to avoid a run-off. While the office of president is set to become more of a ceremonial role following constitutional amendments that will shift most executive powers to the legislature, the vote does highlight the spectacular collapse of the United National Movement's (UNM) support base, as well as solidifying the hold of the GD on Georgian politics.

The vote also marks the end of President Mikheil Saakashvili's nine-year tenure in office. His UNM party's candidate David Bakradze came second with 21.7% of the vote, while former speaker of parliament and conservative Democratic Movement-United Georgia (DM-UG) party candidate Nino Burjanadze came third with 10.2%. The collapse of the UNM as Georgia's main political force has been rapid, with little expectation before the October 2012 legislative election that the party would be ousted. However, the population has grown weary of the lack of momentum in improving ties with Russia under the UNM and believed that billionaire Prime Minister Bidzina Ivanishvili, who made his fortune in Russia, and his GD coalition, would be the best placed group to improve ties with the Kremlin.

GD Pull Off Resounding Victory
Georgia - Preliminary Presidential Election Results, %

BMI View: The governing Georgian Dream coalition's candidate, Giorgi Margvelashvili, won the country's presidential election held on October 27, gaining 62.1% of the vote. While the post of president is set to become less influential after the vote, the result strengthens the hand of the Georgian Dream, while ending Mikheil Saakashvili's nine-year tenure in office.

In line with our long-held view ( see 'Election Unlikely To Defuse Political Tensions' October 14) Giorgi Margvelashvili, the candidate of the governing Georgian Dream (GD) coalition, won the October 27 presidential election with a resounding majority. With almost all votes tallied Margvelashvili had garnered 62.1% of the vote, well above the 50%+1 required to avoid a run-off. While the office of president is set to become more of a ceremonial role following constitutional amendments that will shift most executive powers to the legislature, the vote does highlight the spectacular collapse of the United National Movement's (UNM) support base, as well as solidifying the hold of the GD on Georgian politics.

GD Pull Off Resounding Victory
Georgia - Preliminary Presidential Election Results, %

The vote also marks the end of President Mikheil Saakashvili's nine-year tenure in office. His UNM party's candidate David Bakradze came second with 21.7% of the vote, while former speaker of parliament and conservative Democratic Movement-United Georgia (DM-UG) party candidate Nino Burjanadze came third with 10.2%. The collapse of the UNM as Georgia's main political force has been rapid, with little expectation before the October 2012 legislative election that the party would be ousted. However, the population has grown weary of the lack of momentum in improving ties with Russia under the UNM and believed that billionaire Prime Minister Bidzina Ivanishvili, who made his fortune in Russia, and his GD coalition, would be the best placed group to improve ties with the Kremlin.

Despite his own popularity and that of his party remaining strong, Ivanishvili has stated that he will step down in the weeks after the election, and is expected to name a successor in the first week of November, with the current frontrunner being Interior Minister Irakli Gharibashvili. Gharibashvili is a long-time political ally of Ivanishvili having previously held a post at Cartu Bank, owned by the prime minister, before moving on to a charitable fund run by Ivanishvili. We do not expect any significant change in the government's policy direction following Ivanishvili's resignation, with the billionaire still expected to exercise a strong influence over the cabinet.

This policy direction is likely to entail forging closer links with the West, while at the same time attempting to improve relations with Moscow, which were non-existent under President Saakashvili. The reaction of Russia to the Georgian plan to sign a Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU at the Vilnius summit in November could prove an important indicator of future Russo-Georgian economic and political relations. In 2013 Russia resumed imports of Georgian wine and agricultural products, which had been under an embargo since 2006 due to 'quality concerns'.

Risks To Outlook

Following the Georgian Dream's legislative election victory in October 2012 several former UNM state officials were arrested for differing allegations. Most recently former defence minister and head of the prison service Bacho Akhalaia was found guilty of inhuman treatment of prisoners and sentenced to three years and nine months in gaol, in a case that the UNM has called 'politically motivated', given that Akhalaia was sentenced on the day of the presidential election. There have been rumours in local media that Saakashvili could face police questioning once his term in office, which grants him immunity, comes to an end. If this does occur, we could see a severe deterioration in the Georgian political sphere, with the UNM likely to accuse the GD government of corruption, intimidation, or worse misdemeanours.

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Sector: Country Risk
Geography: Georgia
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