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Page last updated at 16:51 GMT, Tuesday, 3 October 2006 17:51 UK

High stakes in Georgia standoff

By Matthew Collin
BBC News, Tbilisi

Georgian woman heating kettles at a wood stove
Georgians fear a return to last winter's power cuts

Georgia is just starting to count the potential cost of Moscow's anger over the arrest of four Russian military intelligence officers on spying charges last week.

The four Russians have now been freed and have returned home, but Moscow remains furious and has cut transport and postal links to Georgia.

The Russian embassy in Tbilisi has stopped issuing visas to Georgian citizens, and the Russian parliament is considering suspending bank transfers to Georgia.

Georgia's economy could suffer as a result, as the restrictions limit Georgians' ability to travel and trade.

Energy fears

A suspension of bank transfers would also be a serious blow, because many Georgians work in Russia and send money home to their families. The remittances are believed to be worth many millions of dollars to the Georgian economy.

RUSSIA-GEORGIA TENSIONS
Map of Georgia

There are also fears about energy security. Russia supplies a lot of Georgia's energy, and some people worry that Moscow could cut Georgia off if the tensions between the Kremlin and the Georgian government rise any further.

They remember last winter, when an energy crisis caused by gas pipeline explosions cut off power supplies and left many people freezing.

Georgia blamed Russia then too, accusing it of sabotaging the pipelines. Some believe the same could happen again when the chill sets in.

"This year, I expect to have a really cold winter," one woman told a Georgian newspaper.

'Economic war'

It would not be the first time that Russian action has threatened the Georgian economy.

One of Georgia's most lucrative export products was its wine. Most of it used to be sold to Russia, earning Georgia around $100m (£53m) in 2005.

Georgian President Mikhail Saakashvili
President Saakashvili: Orientating Georgia towards the West

But earlier this year, Russia banned it, saying some of it was contaminated, along with Georgian mineral water and other foodstuffs.

Georgian President Mikhail Saakashvili said Moscow was waging an "economic war" against Georgia because of his government's desire to get closer to the West.

Some Georgian officials have ridiculed the new Russian sanctions. The head of the national bank said they were so uncivilised, they were not worthy of a country that is a member of the G8 group of major industrialised nations, or even of one where people roam the forests carrying clubs.

President Saakashvili was optimistic earlier this week, just before the spy row reached its peak.

He said that Russia had run out of "economic levers" to pressurise Georgia.

He spoke of World Bank indicators showing how healthy the country's economy was becoming, and how it had managed to find new markets for its wine in places like Ukraine and Kazakhstan.

He suggested that Moscow had now done all it could to undermine Georgia financially.

However, that was before the latest Russian retaliation, and he may have spoken a little too soon.

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