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Page last updated at 05:48 GMT, Monday, 29 December 2008

Russia pours money into Abkhazia

A roadside billboard showing Russian President Dmitry Medvedev and Abkhaz leader Sergei Bagapsh
A billboard shows Russian President Dmitry Medvedev (left) alongside Abkhaz leader Sergei Bagapsh, with the slogan "Peace! Freedom! Independence!"

By Tom Esslemont
BBC News, Sukhumi

From the bridge over Abkhazia's second largest river the four bright yellow diggers ploughing through the water may look like nothing unusual.

In fact, they are the biggest indication yet of Russia's long-term plans to invest heavily in Abkhazia.

The gravel they are extracting from the Kodori river bed is destined for the Russian city of Sochi, further north along the Black Sea coast, for use in one of its most important building projects in the next decade, the 2014 Winter Olympics.

Russia backed Abkhazia's declaration of independence in August 2008 and is the territory's most prominent supporter.

The two agreed to co-operate long before Georgia's August war with Russia.

Russian money

Now redevelopment is going ahead on a grand scale, despite Georgia's assertion that Abkhazia is still legally one of its territories.

Thanks to Russia, we can feel safe economically
Kristina Ozgan, Abkhazia's finance minister

In the capital, Sukhumi, new restaurants, hotels and entertainment attractions line the Black Sea promenade. Many have been renovated with Russian money.

This new wave of investment marks a welcome change for a tiny seaside territory where war is never far from the memory.

Houses, government buildings and palaces still lie in ruins after the war for independence against Georgia in the early 1990s. A subsequent economic blockade by Georgia froze development plans.

Abkhazia's finance minister, Kristina Ozgan, welcomes the recent change. Anyone, not just Russia, should feel welcome to invest in Abkhazia, she says.

"You have to understand, Abkhazia does not select which business comes here, it invites business. Other countries don't want to work here without guarantees, but Russia does."

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She refuses to name a figure, but suggests Russian investment amounts to more than 68m ($100m) this year alone.

"Thanks to Russia, we can feel safe economically," she tells me.

Outside, I notice a large roadside billboard poster in which Russian President Dmitry Medvedev is pictured next to his Abkhaz counterpart, Sergei Bagapsh, with the slogan "Peace! Freedom! Independence!"

Russia and Abkhazia - just like the two men in the poster - stand shoulder-to-shoulder at the moment.

Security questions

Not everyone is as enthusiastic about Russia's role.

Sergei Sharagov runs a real estate agency in Sukhumi. We meet in a newly refurbished restaurant, for which he says he negotiated the initial contract.

It is a glitzy place with high-backed white chairs and sparkling chandeliers.

Diggers extracting gravel from the Kodori river bed
Gravel from the Kodori river bed is destined for the Russian city of Sochi

Mr Sharagov says he has just signed new deals for hotels and an entertainment complex, but he says many investors - especially those in the West - are afraid of putting money into a territory which they do not see as independent. After all, Abkhazia is still a disputed territory.

"I would not say that investors came here quickly. Some are afraid, of course. Many question the security of a deal with this republic. Contracts need to be more watertight before people can feel confident."

He also says few Abkhaz businessmen can afford to compete for the size of contracts available to external investors.

"The Olympics [in Sochi] have pushed up the prices here, meaning many locals are squeezed out of the market. Nevertheless there is more cash now and we should remember that not everything here is tied to the Games."

The restaurant we are in is strangely quiet even at dinner time, but Mr Sharagov is still hopeful that clients will soon arrive.

"This is just the beginning," he says.

New wealth

Walking along Sukhumi's sub-tropical Black Sea promenade you get the sense that tourists could one day flock here - just as they did during the Soviet era.

Anna Yaylian in a new bowling alley
We have opened a brand new bowling centre - the first of its kind. I'm sure such places like this will help to make Sukhumi a better place
Anna Yaylian

Vines straddle the iron balconies of the turreted seaside palaces. In the surrounding hills mandarins dangle jewel-like from the trees.

My visit coincided with the opening of the city's newest coastal attraction - the Black Sea Bowling Arcade. It too has been built with the help of Russian funds.

When there are so many war-damaged buildings around and an unbalanced economy across the region, bowling might not seem a priority. But its manager, Daour Eshba, disagrees.

"Of course it was difficult after the war [in 1992-3], but it was long ago and we have to forget about it. We have to begin a new life, with entertainment, to be happy. We have to laugh every day and play every day."

Inside the arcade young Abkhazians get to grips with the multi-coloured bowling balls and the shiny, new equipment.

Anna Yaylian, 21, is bowling for the first time. She says it is a positive development.

"I was born in this city and I want it to be famous all around the world. As you can see it begins: we have opened a brand new bowling centre - the first of its kind. I'm sure such places like this will help to make Sukhumi a better place."

A man in his twenties who did not want to give his name agreed. "Of course politics is always involved. But today it is about friendship. I can say that it is friendship, because Russian people come here and we like that. I say they have big hearts."

There's no doubting his strong sense of pride in Abkhazia's new wealth. That pride is shared by many others in Sukhumi.

Georgia and the West may have - so far - chosen to ignore Abkhazia's declaration of independence, but the feeling of national identity here is tangible.

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