While most of the American media remains fixated on Libya, the Obama administration just got slapped by what is likely to be another dose of unpleasant reality on the foreign policy front. Billionaire businessman Bidzina Ivanishvili’s opposition coalition has defeated U.S.-backed President Mikheil Saakashvili in the nation of Georgia’s recent parliamentary election. “It’s clear from the preliminary results that the opposition has the lead and it should form the government. And I as president should help them with this,” said Saakashvili, as he conceded defeat early on.

The election results in Georgia’s parliamentary system of governance mean that Ivanishvili will now assume the post of prime minister. Saakashvili will remain president until presidential elections are held in October 2013, at which point he must stand down after having served two terms in office. During that same period, Georgia’s new constitution will transfer presidential powers to the prime minister, likely making Ivanishvili the most powerful man in the country as a result.

This election marks the first time Georgia has witnessed a peaceful transfer of power since the collapse of the Soviet Union. Previous transfers occurred as the result of revolutions or armed uprisings. Saakashvili had risen to power in the 2003 Rose Revolution, when the government of President Eduard Shevardnadze, a former Soviet minister of foreign affairs, was forced out of power.

During his tenure as president Saakashvili helped to foster an economic turnaround in Georgia and, just as importantly, helped guide the nation towards the West and away from their history of Soviet subjugation. That effort hit a serious speed bump in 2008, when Russia precipitated a five day tank and bomber assault that “freed” the  secession-minded provinces of South Ossetia and Abkhazia from Georgian rule. Both regions remain independent states, but are now well within the Russian sphere of influence.

As a result of this election, that sphere of influence just might include the rest of Georgia. Saakashvili’s supporters have characterized Ivanishvili as a “Russian stooge,” based on his promises to forge closer ties with Moscow. No doubt those promises are due in large part to the fact that Ivanishvili has amassed a fortune from Russian investments: Forbes puts the figure $6.4 billion. For perspective’s sake, it should be noted that Georgia’s national budget in 2011 was $3.98 billion. Thus, it is unsurprising that Ivanishvili, who had spent years spreading his wealth among such entities as the Georgian Orthodox Church, various arts organizations, and charitable causes in his home region of Imereti, was able to put a viable coalition together, despite entering the political arena as recently as last year. Equally unsurprising, was Saakashvili’s claim that although he considered the election to be fair, Ivanishvili was able to “buy” the political process.

Yet Mr. Ivanishvili, who has criticized Saakashvili’s hostility towards Russia, refuted those claims. At a news conference following the election he said that Georgia was still aiming for NATO membership, even though he hoped to improve relationships with Russia. “Nothing will disturb our strategy – our strategic direction is NATO,” he said, further claiming there would be no contact with the Kremlin. “Georgia cannot be a big geopolitical player, as Saakashvili said. We should be a regional player,” he added. As for the election results, Ivanishvili contended Saakashvili had no one but himself to blame. "We had great hopes when he came in. He studied in America; we thought he had an American mentality. But he turned from a democrat into an autocrat. He turned into an authoritarian.“

Yet there are still logistical problems Ivanishvili will have to iron out. The election was bitterly fought, and the two leaders must figure out a way to share power at least until 2013. It also remains to be seen if the the disparate six-party coalition that forms the Georgian Dream can hold itself together. And then there is the Georgian voting system which elects candidates by two methods: 77 out of 150 parliamentary seats in total are decided by the proportional, party list method, while the other 73 seats are secured by a "first-past-the-post" methods of voting, in which the first candidate to receive a plurality of votes is declared the winner. According to Georgia’s Central Electoral Commission (CEC) rival blocs are running "neck-and-neck” among the 73 first-past-the-post constituencies. This means it’s possible that the current ruling party could still maintain a majority, even if it loses the popular vote.

Post-election bitterness may be the key factor in determining all of the above. Like many U.S. elections, there was a late-inning, game-changing “surprise” that turned a lead of more than 20 percentage points held by Saakashvili’s party last month into this stunning result. On September 18th, a series of smuggled videos showing prison inmates being beaten and sodomized by their guards in a Tbilisi jail appeared on the scene. Saakashvili responded by arresting penal officials, firing his ministers of prisons and the interior, and releasing details of dubious financing surrounding the videos. He even suggested the videos had been staged. Yet the anti-government protests that erupted almost immediately apparently took their toll.

Observers from the Organization for Security and Cooperation in Europe characterized the election results as legitimate. “Despite the very polarized campaign that included harsh rhetoric and shortcomings, the Georgian people have freely expressed their will at the ballot box,” the OSCE reported. “The process has shown a healthy respect for fundamental freedoms at the heart of democratic elections, and we expect the final count will reflect the choice of the voters.”

Yet Mark Mullen, chairman of Transparency International Georgia, was somewhat less optimistic. ’‘If we see some form of power sharing – and it looks like one way or another it’s gonna have to happen – it’s going to be really unprecedented,“ he said.

The new government will not be short of suitors. Russia and the EU will compete with America for the affections of a nation whose three major pipelines allow for the flow of gas and oil to the Black Sea and Turkey from neighboring Azerbaijan – bypassing Russia in the process. As recently as the middle of last month, Russia was angered by an EU offer to broker talks between Azerbaijan and Turkmenistan aimed at creating a trans-Caspian pipeline that would deliver fuel to the West. That deal would reduce Russia’s current leverage, and make recurring disputes between Russia and the Ukraine – which have led to fuel cutoffs in Europe – less problematic.

With regard to the U.S., despite Ivanishvili’s stated intention to continue pursuing NATO membership, there is little doubt that the defeat of the staunchly-pro-American Saakashvili represents a setback for U.S. interests in the region. It is no secret that Vladimir Putin wants to build a Eurasian Union "capable of becoming one of the poles in the modern world.” It is also no secret that the Obama administration, via its “reset button” strategy, has been more than accommodating in return. Whether or not the fledgling, and promising, Republic of Georgia will fall back into the influence of corrupt Russian hegemony remains to be seen.

Arnold Ahlert is a columnist for FrontPage Magazine.