We respond to the obvious fact of political influence on the National Bank of Georgia

Statements | Rule of Law and Human Rights 20 September 2023

 The decision taken by the National Bank of Georgia is not only incompatible but also detrimental to the constitutional mandate of the National Bank, which ensures the stable functioning of the financial sector. This decision is a clear indicator of political and oligarchic influence exerted upon an independent constitutional institution. 


It is clear that the acting president of the National Bank of Georgia, Natia Turnava, is directly responsible for making political decisions, which is confirmed by the resignation of all vice presidents of National Bank and the advisor to the president of National Bank. 


We believe that Natia Turnava should take personal responsibility, reinstate the established standard sanctioning procedure and step down from the position. 


On September 14, 2023 the U.S. State Department announced a new package of sanctions in response to Russia’s military aggression in Ukraine. The former General Prosecutor of Georgia,  Otar Anzorovich Partskhaladze, allegedly, a citizen of the Russian Federation, has been added to the list of individuals subject to sanctions due to the strengthening of Russian influence in the political and public life of Georgia.  In response to the news, the National Bank of Georgia made an official announcement on September 18, 2023, confirming that Georgian Banks had taken measures to limit  Otar Anzorovich Partskhaladze's access to bank assets and the conduction of financial transactions. On the same day, Irakli Kobakhidze, the chairman of "Georgian Dream," accused the National Bank of having violated the Constitution of Georgia. He pointed out that the decision was unconstitutional because Partskhaladze, as a citizen of Georgia, is entitled to special protection guarantees under the Constitution. It's worth noting that, according to IDFI, Partskhaladze has lost his Georgian citizenship, and the Ministry of Justice is intentionally delaying the formal acknowledgment of this fact.


Following Irakli Kobakhidze's statement, on September 19, 2023, Natia Turnava, the acting president of the National Bank of Georgia, seemingly without adequate consultation, issued a special exceptional order, No. 253/04. This order rendered the rules governing the enforcement of sanctions. In her justification for the change, Natia Turnava repeated the arguments made by Irakli Kobakhidze, emphasizing the principles of "constitutionality" and "citizenship" as the basis for the amendment.


According to the first and third paragraphs of Article 68 of the Constitution of Georgia, The National Bank shall be independent in its activity. The National Bank of Georgia shall conduct monetary policy to ensure price stability and maintain the stable operation of the financial sector. The independence of the National Bank is the fundamental cornerstone for the effective fulfillment of its constitutional mandate. Replacing professional decisions with political ones poses a significant risk of decreasing confidence in the country's financial stability, both domestically and on the international level, which may have a serious impact on the country's economic situation.


Sanctions were imposed on Partskhaladze as part of the broader sanctions implemented against Russia in response to its invasion of Ukraine. It's important to emphasize that the sanctions imposed on Partskhaladze were not related to so-called “doing business" in Russia but were based on his collaboration with a Russian Federal Security Service (FBS) officer and his actions that were perceived as promoting Russian influence in Georgia.


Limiting banking services for sanctioned individuals and entities is one of the methods employed by democratic nations in response to Russia's disregard for international order and security, as well as its efforts to capture a sovereign state. Sanctions levied against Russia inherently signify the stance of the international community toward Russia and nations aligned with it. Their execution serves as a prominent indicator of the foreign policy priorities of individual states. Basing a decision of such significance solely on the national legal context is fundamentally wrong. The narrative put forth by "Georgian Dream" concerning "constitutionality" and "citizen protection" appears to be primarily a political statement. It is deemed manipulative and diverges significantly from the actual facts, making it unsuitable for a substantive legal discussion. It is noteworthy that the arguments put forth by the ruling party bear a striking resemblance to the Russian "sovereign democracy" doctrine, a concept that is largely disconnected from genuine principles of both sovereignty and democracy.


Regrettably, the Acting President of the National Bank of Georgia did not maintain the necessary level of political resilience and amended her decision to strengthen legal safeguards for individuals like Otar Partskhaladze and similar oligarchs in the future, consequently putting under quest the stability of Georgian financial institutions. The extraordinary alteration in the process for implementing international sanctions against Russia by the National Bank of Georgia is incongruent with the constitutional mandate of the National Bank, which is entrusted with the duty to facilitate the stable operation of the financial sector. Furthermore, the National Bank's decision has adverse effects on both the stability of the financial sector and the execution of monetary policy aimed at ensuring price stability.


It should be noted that after Natia Turnava's decision, three vice-presidents of the National Bank (Papuna Lezhava, Archil Mestvrishvili, Nikoloz Gagua) resigned, as well as the president's advisor. They noted that the Acting President of the National Bank did not engage in consultations with the members of the National Bank's Board when modifying the sanctions enforcement procedure. This indirectly indicates that Turnava made the problematic decision alone, and therefore, she should assume responsibility by reinstating the previous model of sanctions enforcement and resign from her position.


The incident once again confirms the need for reducing political and oligarchic influences in public service, especially in independent constitutional institutions. It should be noted that overcoming this problem, including "deoligarchization" is a necessary precondition for Georgia to attain the candidate status for the European Union. Unfortunately, attempts to exert political influence on the National Bank and the establishment of a precedent for circumventing sanctions imposed on Russia will serve as additional obstacles for Georgia on its path towards the European Union. 




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