Sanctioning one billionaire might just save a nation

By Marc Champion

Georgia is having its “Maidan moment.” With parallels to Ukraine mounting fast, the question for the US and Europe is how to respond; for the protesters, it’s whether they should also have a “Yanukovych moment,” in which they try to topple the government. The answer to the first question is complicated, but for the second it’s simple: No.

As in Kyiv during the winter of 2013-2014, huge crowds have been taking to the streets of the Georgian capital Tbilisi. The immediate cause of the protests is a foreign-agent law that the ruling Georgian Dream party has introduced to parliament, championed by its leader and bankroller, the multibillionaire Bidzina Ivanishvili.

And again, as in Ukraine, the real issue goes much deeper: It’s about what kind of future Georgians want, at a juncture when a government that’s forever paying lip service to their desire to join the European Union appears to be choosing the road to Moscow instead. Something will have to give.

In Ukraine, it was the country’s infamously corrupt then-President Viktor Yanukovych who broke. Despite deploying riot police, plainclothes thugs nicknamed “titushki” and, finally, snipers who fired live rounds into the crowds, he proved unable to drive protesters from the streets, and eventually fled to exile in Russia. In Georgia last week, carbon copies of the Ukrainian titushki were thrown into action, beating protest leaders, opposition politicians and even an inconvenient academic outside their homes. Others attacked the crowds on April 30, although another huge march passed peacefully this weekend.

At the same time, the government says it’s assembling a database of protesters and other undesirables. Posters with the faces and names of some on the government’s hit list, including journalists, have been plastered across the neighborhoods where they live, marking them out as “enemies of the people.”

This is chilling stuff, making clear the government’s intent to use the foreign-agent law the way Russia does, as a tool of repression ahead of elections in October, rather than to force transparency on lobbyists, as in the US. It’s the wider context, though, that resonates most with Ukraine and, by the same token, is most worrying.

Ukraine’s Maidan protests began over Yanukovych’s decision to renege on signing a free-trade deal with the EU that many Ukrainians saw as a make-or-break moment, deciding whether they would live like Poles or like Russians. About 80 per cent of Georgians tell pollsters they also want to join the EU, which only months ago offered the country candidate status. The foreign-agent bill — which parliament will adopt for presidential signature within days, Prime Miniser Irakli Kobakhidze said in a briefing Sunday — seems tailor-made to throw that accession process off track.

The bill threatens to tear the nation apart. Georgia's elected President Salome Zurabishvili shot back with a public address pledging to veto the bill. She also warned security forces against carrying out any further orders to suppress the protests by force.

The wrinkle here is that Ukraine is actually behind Georgia’s curve in this story. The latter was the first to have a so-called color revolution, in 2003, and to suffer Russian invasion, in 2008. The result is that Russian troops already occupy about 20 per cent of Georgian territory; Russian tanks are as close as 56 kilometers (35 miles) from the parliament in Tbilisi. Putin’s military may be stretched, but his response to another pro-Western popular “coup” in Tbilisi isn’t hard to imagine. Better for the opposition parties and protesters to focus on winning October’s election, despite all the hurdles.

But what should the West do? The EU is in an especially difficult position, wanting to support a population that’s anxious to join, but at the same time not to reward — or, worse, bring into the fold — a government that has in essence been bought by a billionaire and joined with Putin and Hungary’s Prime Minister Viktor Orban in denigrating European values as decadent.

Sanctions, now a go-to tool for the West, are already under discussion in Washington. I’m not usually a fan — they tend to be blunt and slow-moving instruments, more likely to inflict collateral damage than to achieve their goals. But if the US Treasury and European Commission move quickly, this just might be that rare case in which sanctioning a single individual can change policy.

That’s because Ivanishvili’s billions are critical to himself and to Georgian Dream. He has more than $1 billion tied up in escrow, pending court appeals against awards he won in a long-running dispute with Credit Suisse, now owned by UBS Group AG. But Ivanishvili — who made his fortune in Russia in the 1990s and whose net worth the Bloomberg Billionaires Index estimates at $7 billion — appears concerned about funds he holds elsewhere.

Last month, Georgian Dream attempted to pass a law under an accelerated procedure that would allow the tax-free transfer of cash to Georgia from offshore accounts until January 2028. According to a December 2021 study by the anti-corruption agency, Transparency International, Ivanishvili had at least 20 offshore accounts at the time.

The government says the aim of the law is to encourage Georgian companies — some of which register offshore to avoid tax — to bring their capital and income streams home. Transparency International is understandably skeptical, not least because of the sudden rush. The law could enable Ivanishvili to repatriate funds, sheltering his money from any Western sanctions, without having to pay a large penalty in taxes. It also would risk turning Georgia itself into an attractive offshore haven for wealthy Russian businesspeople and criminals.

It may not be too late for sanctions to bite and force a rethink, if governments move quickly. Zurabishvili vetoed the so-called offshore law on May 3, in the name of protecting Georgia’s Euro-Atlantic aspirations.

The delay is unlikely to be long, though. Georgian Dream has a sufficient majority to override Zurabishvili’s veto, both on the offshore law and the foreign agent legislation, once that reaches her desk. This is a rare occasion when freezing the assets of a single unelected official would directly affect the same person who finances and controls the government. If that can be done, it’s an opportunity that shouldn’t be missed.