S&P: Georgia may be pressured

Standard & Poor's said that deteriorating relations between the Government of Georgia (B+/positive/B) and The Russian Federation (foreign currency BBB+/stable/A-2, local currency A-/stable/A-2) may threaten the positive ratings outlook on Georgia.

According to the agency, tensions between the two countries have increased since Georgian President Mikheil Saakashvili came to power in the Rose Revolution of 2003, on a platform that included calling for an end to Russia's military presence in Georgia and to Russian influence in domestic politics, particularly in the breakaway regions of Abkhazia and South Ossetia.

Russia had been carrying out a gradual withdrawal from its two bases in Georgia, which it plans to complete by year-end 2008, before relations took a sharp turn for the worse in the past week, following the arrest of four Russian officers accused of espionage, S&P said.

Despite the release of the Russian officers in an attempt to defuse the growing crisis between the two countries, Russia has now imposed a ban on all transport to Georgia, including postal services, the agency added.

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