06MOSCOW5104, RUSSIA-GEORGIA: BORJOMI MINERAL WATER BAN

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Reference ID Created Released Classification Origin
06MOSCOW5104 2006-05-15 09:33 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO4361
PP RUEHDBU
DE RUEHMO #5104/01 1350933
ZNY CCCCC ZZH
P 150933Z MAY 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 5777
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEHC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUEHC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 005104 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS TO COMMERCE AND AGRICULTURE 
 
STATE PASS USTR, PASS USDA FOR FAS/ITP/BOB MACKE,ALISON 
THOMAS 
 
 
 
E.O. 12958: DECL: 05/15/2016 
TAGS: PREL ETRD GG RS
SUBJECT: RUSSIA-GEORGIA:  BORJOMI MINERAL WATER BAN 
 
REF: TBILISI 1131 AND PREV. 
 
Classified By: Minister-Counselor for Political Affairs Kirk Augustine. 
  Reason 1.4 (b, d) 
 
1. (C) Summary:  Jacques Fleury, Managing Director of 
Georgian Glass and Mineral Waters (GGMW), producer of Borjomi 
water, outlined for us May 12 the company's recent troubles 
with the Russian government.  A press campaign had turned 
into threats by the GOR to ban import of the water; the ban 
was announced one day after Georgian DefMin Okruashvili made 
provocative statements about Russia.  Fleury did not believe 
that the identity of the firm's beneficial owner -- oligarch 
Badri Patarkatsishvili -- was a factor in Russian or Georgian 
government thinking on the issue.  But Fleury had been warned 
by a GOR official that the problems could be resolved only at 
senior political levels -- and that GGMW should not make a 
public fuss about the ban until after the G-8 summit in July. 
 End Summary. 
 
History of a Ban 
---------------- 
 
2. (C) Fleury first detailed a strange case of poisoning that 
occurred in Moscow 18 months ago.  Caustic soda was inserted 
in a bottle of Borjomi and served in an expensive restaurant, 
causing severe internal burns.  Fleury said this method had 
been used in three attacks on Nestle in France several years 
ago.  He said the sabotage against both Borjomi and Nestle 
was highly sophisticated. 
 
3. (C)  Fleury said that earlier poisoning was mentioned when 
the TV publicity campaign against Borjomi began April 7.  The 
publicity charged that 50 percent of the Borjomi on the 
Russian market was counterfeit.  Fleury said this was not 
true.  He explained that after years of collaboration with 
RosPotrebNadzor (RPN), the Russian phyto-sanitary agency, 
counterfeiting of Borjomi has been reduced to between 0.5 and 
one percent of the Borjomi on the Russian market.  All of the 
counterfeit water is produced by one source in Mari-el 
district.  GGMW has been unable to stop this trade, as the 
manufacture is under the protection of the Mari-el local 
authorities and sold in kiosks. One hundred percent of the 
Borjomi actually imported into Russia is genuine, Fleury 
said, and GGMW has been able to prove this by comparing 
export figures with Russian customs import figures. 
 
4. (C) Fleury said that RPN had then begun raids on 
warehouses of Borjomi distributors, and had confiscated 
thousands of bottles each time.  Fleury said GGMW officials 
and lawyers had been able to be present at some of these 
raids, had taken parallel samples, and sent them to the same 
official Russian laboratory that was to analyze the bottles 
confiscated by RPN.  The laboratory cleared GGMW's samples, 
and informally told GGMW that RPN had not actually sent the 
samples to the lab before announcing that they violated 
Russian norms.  Fleury said that RPN had not responded to 
repeated requests for the results of the RPN analyses. 
 
5. (C) On April 24 RPN Chief Medical Officer Onishchenko 
announced that Borjomi was a good company and in all 
probability no action would be taken against its water.  On 
April 25, in Kiev, Georgian DefMin Okruashvili announced that 
even "fecal matter" would sell on the Russian market.  On 
April 26, Fleury said, Russian TV showed a news item in which 
fecal matter was discovered in Borjomi bottles, and 
Onishchenko announced that import of Borjomi would be banned. 
 One hour after Georgian President Saakashvili's statement at 
the Vilnius Summit, all Borjomi was ordered off Russian store 
shelves. 
 
Contacts with RosPotrebNadzor -- and an Unknown Factor 
--------------------------------------------- --------- 
 
6. (C) Fleury said GGMW's long-term objective is to re-enter 
the Russian market, but in the meantime it has 25 million 
bottles worth USD 15 million sitting in warehouses in Russia. 
 It wants to re-export them to sell in Ukraine and 
Kazakhstan, but is afraid that the GOR might then charge GGMW 
with the crime of trying to export a "dangerous substance." 
 
7. (C) Fleury said he tried to address these issues in a May 
11 meeting at RPN.  Two of the RPN participants were 
technicians known to GGMW, but the third, who ran the 
meeting, was never introduced to them, and appeared not to be 
from RPN at all.  This official said that GGMW was following 
a wise course by keeping a low public profile on the issue 
 
MOSCOW 00005104  002 OF 003 
 
 
(he contrasted this with a high-profile Georgian wine 
manufacturer who has threatened to bring Onishchenko to 
trial).  The man implied that if GGMW stuck to this course, 
the GOR would revisit the issue after "mid-July" (Comment: 
i.e., after the G-8 Summit.  End comment).  The official said 
that nothing could change before then, though he said the GOR 
would look at the GGMW request to re-export its stock
s from 
Russia.  Meanwhile, the official warned that nothing could be 
resolved at the level of GGMW and RPN, only at much higher 
levels. 
 
High-Profile Partners 
--------------------- 
 
8. (C) Fleury dismissed the possibility that GGMW's troubles 
with Russia might have something to do with GGMW's owners. 
He explained that the majority stake has been held since 2003 
by New World Investments, a UK holding company whose 
beneficial owners were originally exiled oligarch Boris 
Berezovskiy and his partner Badri Patarkatsishvili, whose 
residence in his native Georgia provides refuge from his 
wanted status in Russia.  Fleury explained that the two had a 
falling out, and Patarkatsishvili is now sole owner of the 
holding company.  (The initial owners of GGMW, TBC Bank 
(Mamuka Khazaradze and Badri Japaridze), retain an 8 percent 
share in GGMW, and the management, including Fleury, own an 
unspecified small percentage as well.) 
 
Financial Losses -- Georgian and Turkish 
---------------------------------------- 
 
9. (C) Fleury said that the loss of the Russian market would 
reduce GGMW's annual sales from USD 240 million to USD 85 
million.  The major market that would remain is in Ukraine, 
where Borjomi and two Ukrainian factories owned by GGMW have 
a 31 percent market share.  An additional loss would accrue 
to a joint venture with Turkey's major glassmaker, Sise-Cam, 
which had just invested USD 25 million in a new GGMW factory 
in Borjomi as a way of making further inroads into the 
Russian market.  The factory was scheduled to be inaugurated 
in July, but those plans are now on hold. 
 
Relations with the Georgian Government 
-------------------------------------- 
 
10. (C) Fleury said GGMW is distancing itself from the 
Georgian government as much as possible.  He noted that the 
GOG's statements have more often hurt than helped.   Fleury 
said that well-connected sources within the GOG had indicated 
to GGMW that Okruashvili's provocative stance in Kiev had 
been agreed in advance with President Saakashvili and MinInt 
Merabishvili.  Fleury noted the current animosity between 
Georgia's leadership and GGMW beneficial owner 
Patarkatsishvili, but did not imply that it affected the GOG 
attitude in the Borjomi ban.  Fleury recounted a conversation 
with people "close to the Kremlin" who, he is convinced, 
fully expect a war in South Ossetia that could easily be 
engineered by provoking the Georgians into a foolhardy 
reaction.  (Note:  We have heard this, too, but believe it is 
speculation based on the general anti-Georgian atmosphere 
rather than information from people who know what the Kremlin 
is planning.  Similar rumors are circulating of refugee camps 
under construction in North Ossetia to house South Ossetian 
refugees from a potential new outbreak of fighting.  End 
note.) 
 
11. (C) Fleury said GGMW would try to get the EU to put 
pressure on the Russian government to end the ban.  He said 
he was not seeking U.S. pressure at this point, as that might 
be counterproductive.  He hoped, though, that the issue could 
come up for discussion at the G-8 summit.  AgAtt explained 
that Russian WTO membership would be an incentive against 
this type of GOR action. 
 
Comment 
------- 
 
12. (C) Borjomi is a Russian institution.  Its worldwide 
label includes a fountain and summer residence built in 
Likani by Mikhail Romanov for the Tsar's family in the 1890s. 
 During Soviet times the brand had enormous cachet, which 
lasted through the springs' control by the Mkhedrioni 
militias in the early 1990s when, according to Fleury, 100 
percent of the Borjomi available on the Russian market was 
counterfeit, made from "river water" (and probably included 
no small amount of fecal matter).  A Russian nationalist 
politician, no friend of Georgia, spoke in the Duma about how 
 
MOSCOW 00005104  003 OF 003 
 
 
his aged mother would kill him if Russia banned Borjomi. 
Fleury has carefully ensured that the firm's Russian branches 
are staffed by Russians, and that only Russians, not 
Georgians, interface on the firm's behalf between Borjomi and 
the Russian authorities.  That such a company should be 
caught up in current Russian-Georgian polemics shows the 
depth of Russian animosity towards Georgia. 
BURNS

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