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. Last Updated: 07/27/2016

Money the Big Attraction in S. Ossetia

TSKHINVALI, Georgia -- Georgia's breakaway South Ossetia region says it wants to be part of Russia. If its finances are any guide, it already is.

The tiny strip of land in the foothills of the Caucasus Mountains, still tense after an unresolved separatist war in the 1990s, received more than 60 percent of its budget revenue last year directly from the Russian government, a separatist official said.

This year, the figure will be even higher, and Russian state-controlled companies are pumping in additional cash through major infrastructure projects.

"The money comes from Russia," said Znaur Gassiyev, speaker of the separatist parliament. "It does not come by some back route but directly and openly. The assistance is not trifling."

South Ossetia is a major source of tension between Georgia's pro-Western government and Russia. Georgian forces and Russian-backed separatists regularly engage in skirmishes that threaten to spill over into full-scale conflict.

The Foreign Ministry did not respond to a written request for comment on its financial aid to South Ossetia. It has in the past described it as humanitarian and development aid.

South Ossetia declared its independence from Tbilisi and drove out Georgian forces in the fighting in the early 1990s. The region is still recognized internationally as part of Georgia, and Tbilisi has vowed to restore its control here.

Russia has for years been close to South Ossetia -- a relationship that angers Georgia, which accuses Moscow of using the separatists to meddle in its affairs.

Almost all of the 50,000 people in the separatist region hold Russian passports, transactions are in rubles and Moscow is the region's biggest diplomatic supporter. South Ossetia has close ethnic ties with its Russian neighbor, North Ossetia.

"I feel like we are part of Russia," said Inna, a civil servant, at a cafe in Tskhinvali.

Gassiyev, who as speaker of the parliament oversees the approval the annual budget, said last year that it had revenues of about 800 million rubles ($31.5 million). Of this, 500 million rubles came directly from the Russian federal budget.

"This year we are just working out the figures for the first half, but it seems for the first six months, [Russian budgetary assistance] will be 500 million [rubles]," he said in an interview.

Nonbudgetary assistance from Russia is even greater. State-controlled gas giant Gazprom has begun building new gas pipelines and infrastructure for the region, a project with a price tag of 15 billion rubles, Gassiyev said.

He said the company itself was funding the project, due for completion late next year. A new road bypassing Georgian-controlled territory was built with Russian financing and contractors at a cost of 340 million rubles.

Other Russian projects under way include a plan to build a new electricity line linking South Ossetia to the Russian grid, as well as a new water pipeline. The water project is being paid for by neighboring Russian regions, Gassiyev said.

Gassiyev said the assistance stemmed from a treaty signed in the 1990s between Georgia and Russia -- but never ratified by Tbilisi -- to rebuild the region after the fighting.

But Tbilisi accuses Russia of using the cash to arm separatist troops who clash with Georgian forces, skirmishes that sometimes leave soldiers and civilians on both sides dead.

"Under different circumstances, we would simply welcome investment from Russia, but in this case it's against our national interests and the interests of the people who live in South Ossetia," said Giga Bokeria, a senior Georgian lawmaker.