The United National Movement (UNM) of President Mikhail Saakashvili was defeated in October’s elections. It lost the parliamentary majority it had held since 2003 to the recently founded opposition bloc Georgian Dream. The latter is led by billionaire Bidzina Ivanishvili, whose political ambitions had been met with harassment by the authorities, including disputable fines, as they, rightly, feared Mr Ivanishvili could successfully align Georgia’s dispersed opposition forces. Mr Ivanishvili will now become prime minister, though for the time being most executive powers reside in the presidential office.

Impact on country risk

Last month’s elections were the most anticipated since the disputed 2003 polls which triggered the Rose Revolution and the subsequent election of Mikhail Saakashvili. The latter’s second and final term as president ends next year and he had hoped to become PM afterwards, an office in which more powers will be vested when Saakashvili leaves the office of president and constitutional changes take effect. President Saakashvili was quick to admit the defeat of his party, and both he and Mr Ivanishvili indicated that, despite the sharp rhetoric during the campaign, they will seek to collaborate. Even though cohabitation will have to be put in practice, it underscores the orderly transition of power in Georgia, by far the most democratic country in the region – international observers said the vote was largely free and fair. Nevertheless, the politically inexperienced PM in-waiting Ivanishvili now faces the uphill task of holding his majority together. Georgian Dream is a heterogeneous alliance of which the unity laid in a joint wish to defeat UNM, but saw internal bickering once concrete policies needed to be put forward. All in all, no major policy shifts are expected. The new cabinet line-up is characterized by pro-Western, pro-market and pro-democracy figures. With regard to foreign policy, Ivanishvili has stated repeatedly that he wants to continue Georgia’s Western-oriented stance and simultaneously mend relations with Russia, frozen ever since the disastrous 2008 war. Towards South Ossetia and Abkhazia, Georgia’s breakaway regions under the protection of Russia, he aims to take a more conciliatory stance, though the margin for rapprochement seems rather limited.

Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com