Even as it contends with a continuing domestic protest in Tbilisi, Georgian President Mikhail Saakashvili's administration remains fixated on efforts to promote Georgia's territorial re-integration.

Georgian Prime Minister Zurab Noghaideli on October 30 made a fresh appearance at the Vienna headquarters of the Organization for Security and Cooperation in Europe (OSCE) to promote Tbilisi's efforts to regain control over its breakaway republic of South Ossetia.

Addressing the organization's 56 ambassadors, he announced that his government had decided to contribute an additional 250,000 euros ($362,000) to the OSCE-led Economic Rehabilitation Program (ERP) for South Ossetia.

Noghaideli said the new installment would be earmarked for the renovation of the Tiriponi water irrigation system and that of the main hospital in Tskhinvali, the separatist-held capital of South Ossetia.

The Tiriponi irrigation canal taps into a water main located in a part of South Ossetia that is controlled by the separatist government of Eduard Kokoity. It then crosses through Tbilisi-controlled areas before reaching Georgia proper.

Access to South Ossetia's water resources is a source of conflict between the region's divided communities. Earlier this year residents of ethnic Georgian villages diverted water from the region's main pipeline to irrigate their fields, cutting supplies to Tskhinvali.

Talking to reporters after his address to the OSCE's Permanent Council, Noghaideli said his government believed the Tskhinvali hospital should be open to all residents of South Ossetia, including ethnic Georgians who live in areas under Tbilisi's control.

"I have also instructed our health minister [Davit Tkeshelashvili] that he should include the Tskhinvali hospital into our hospital plan [so that] if some services cannot be provided [there] we would be taking patients to other, more modern hospitals in Kutaisi or Tbilisi for further treatment," Noghaideli said.

The internationally-funded ERP stems from a Georgian-South Ossetian agreement signed in Sochi in 2004. It focuses on economic development -- mainly by helping train local farmers in modern agriculture techniques -- and infrastructure rehabilitation.

The Joint Control Commission, the quadripartite body that supervises the implementation of the 1992 Georgian-South Ossetian ceasefire agreement, endorsed the ERP in May 2006.

The following month a donors conference held in Brussels raised 7.8 million euros from about 20 contributors. With 2 million euros and $2 million respectively, the European Commission -- the European Union's executive arm -- and the United States are the largest donors. The rest comes from individual contributions made by EU and non-EU countries.

Although Georgia has promised to match donor pledges, foreign observers note that Tbilisi's contribution remains too small. Before the late October announcement, Georgia had pledged only 50,000 euros to the ERP.

International experts have described the OSCE-led program as the only area of tangible cooperation between Georgians and Ossetians. "[This program] can create conditions for confidence building and foster ties across the conflict divide," read a report released early last June by the International Crisis Group (ICG). The Brussels-based think tank warned however that "economic rehabilitation can support the peace process if there is mutual will to settle the conflict, but not if readiness to search for compromises remain weak and the sides engage in unilateral, competing programs."

In parallel to the ERP, Georgia and Russia have launched their own economic programs for South Ossetia.

Both countries seven years ago agreed to coordinate steps aimed at rehabilitating the region's crumbling infrastructure, but Tbilisi withdrew from the agreement last April. The reasons for this decision remain unclear. Tbilisi had previously threatened to renounce the agreement, accusing Russia of implementing unilateral economic projects. Of particular concern to Georgia is Moscow's direct financial help to the separatist leadership, and a project to build a natural gas pipeline linking Tskhinvali to Russia's southern republic of North Ossetia.

Construction of the pipeline started a year ago and should be completed soon. Tbilisi claims the project, which aims at making Tskhinvali independent from Georgian gas supplies, is proof of Moscow's desire to annex the separatist region.

Georgia's unilateral economic initiatives have also stoked concern and controversy. Observers note that instead of focusing to the ERP, Tbilisi has been concentrating its efforts on the economic rehabilitation of areas administered by Dmitri Sanakoyev's provisional administration of South Ossetia -- a loyalist body whose creation was voted by the Georgian parliament in April 2007. [For background see the Eurasia Insight archive]. South Ossetia's separatist leadership, along with Russia, describe Sanakoyev as a Georgian "puppet" -- a charge Tbilisi rejects.

The Georgian government has earmarked at least the equivalent of $7 million to help the Sanakoyev administration implement a number of economic and social projects aimed at winning the hearts and minds of South Ossetia's population. Those projects focus on the construction of schools and sports facilities, as well as on the renovation of gas and water conduits. [For background see the Eurasia Insight archive].

The ICG in its recent report quoted western diplomats as saying that Tbilisi's unilateral assistance has "sacrificed transparency and accountability" to quickly win local loyalties.

In his address to the OSCE, Noghaideli called for implementation of a comprehensive regional rehabilitation plan, adding that Georgia was prepared to allocate additional funds for that purpose.

While saying such a plan should involve all components of South Ossetia's population, he warned against letting the separatist leaders "hijack" reconstruction projects and "exploit them for their private interests, or for encouraging secession and separation" from Georgia.

That South Ossetia's economic rehabilitation remains a highly politicized issue became even more obvious when Lithuania recently threatened to participate only in ERP projects that will be implemented in Sanakoyev-controlled areas. In a note quoted by the Akhali Ambebi-Sakartvelo (Novosti-Gruziya) news agency, the Lithuanian Embassy to Georgia said the warning was a response to the separatist government's refusal to let Lithuanian civil engineers conduct an assessment mission in Tskhinvali.

In a statement posted on its website on October 22, separatist authorities explained that the Lithuanian experts were barred from Tskhinvali due to Vilnius' alleged strong ties with Sanakoyev's "sham administration."