The mainly Armenian-populated Georgian region of Akhalkalaki has never declared independence from Georgia, or even autonomy within Georgia. But then, one might say that it has never really needed to. Isolated in its bowl of mountains, linked to Georgia by only two atrocious roads, Akhalkalaki is already very much a world unto itself.

The local currencies are the Russian ruble and the Armenian dram. So rare are Georgian Lari that vendors in the bazaar are extremely vague about the exchange rate. The Georgian language is rarely heard, and hardly even taught in the schools, if only because the Georgian Education Ministry's lack of funds has gravely limited the supply of new textbooks. The television watched is Russian or Armenian.

Above all, there is absolutely no presence of the Georgian armed forces. The last time they tried even to enter the region was in August 1998, when a Georgian force attempted to hold exercises in the region, and was turned back by a crowd which blocked the road, alleging that this was a ploy to establish a permanent – and in their view, highly undesirable – Georgian military garrison.

Instead, Akhalkalaki remains home to a Russian military base, with the slogan "To Defend the Interests of the Russian State" blazoned defiantly on the wall outside its main gate. Akhalkalaki's position on the Turkish border, and on a natural route from Turkey into the southern Caucasus, has long made the area a strategic prize. A ruined medieval castle lies just outside town, and was used by the Ottoman Turks as a fortress. The Russian Empire established a strong garrison there; and in Soviet times the base in Akhalkalaki was the headquarters of a powerful group of forces which confronted those of NATO's Turkey a few miles away across the border.

Today, the vast majority of those forces have gone. Under the renegotiated flanking provisions of the Conventional Forces in Europe (CFE) Treaty, Russia reduced its forces in the region still further over the course of last year, withdrawing sixty tanks and more than four hundred armored vehicles from Georgia. In October 2000, 76 armored vehicles were moved from Akhalkalaki across the border into Armenia. However, the Akhalkalaki base remains home to up to 3,000 Russian soldiers, and is one of four Russian bases to remain in Georgia.

Moscow sees the retention of at least a residual military presence in Georgia as essential to secure its lines of communication to the Russian forces stationed in Armenia, and more widely as a way of limiting US and Turkish influence in the southern Caucasus. The Georgian administration of Eduard Shevardnadze, backed by the USA and to a lesser extent the West Europeans, has long pressed for their withdrawal. At the Istanbul summit of the Organization for Security and Cooperation in Europe in November 1999, Russia agreed to withdraw two of these bases, at Vaziani near Tbilisi and Gudauta in Abkhazia, by July of this year - though Moscow is still trying to negotiate continued use of the airfield at Vaziani.

However, concerning the other two bases, at Batumi in the autonomous republic of Ajara, and at Akhalkalaki, Russia is pressing the Georgians to grant a 15 year lease, in return for a reduction in Georgia's $179 million gas debt to Russia – a deal which would resemble the one struck with Ukraine over Sevastopol in 1996. The Georgians, for their part, have offered a three-year lease.

This position may make some sense as a negotiating counter, but if it is based on a belief that in three years Georgia could take over the base, it is very unrealistic. In fact, nobody with whom I spoke in the Akhalkalaki region – Georgian officials included – thought that there was the slightest chance that Georgia would be able to replace the Russian army even in the medium term, or that Tbilisi either could or should exert any kind of direct pressure to get the Russians to leave.

This is because of the extreme weakness of the central Georgian state, but even more importantly because of the rock solid support of the local Armenian population of Akhalkalaki for a continued Russian presence. Literally every single person with whom I spoke on the streets and in the bazaar wanted the base to stay indefinitely. One reason given was continued fear of Turkey. The local population suffered severely under Turkish occupation in 1918, and also received many refugees from the massacres of Armenians in Turkey during the First World War.

Local Armenian beliefs that Turkey is a serious threat, and that only the Russian army has ever been able to fight off the Turks, are doubtless assiduously stoked by covert Russian military propaganda. However, these beliefs also have deep roots in history and are certainly passionately held. In the words of Artur, a local teacher, "After all, Turkey is less than 30 kilometers from here, and the Georgian army doesn't exist. If the Russians leave, who will protect us in the last resort? We don't want to see Georgian soldiers here one day, and then Turks the next."

As to relations between ordinary Georgians and Armenians, these have remained peaceful (with rare and limited exceptions) but there is considerable underlying tension. Armenians fear a return of the Georgian ethnic chauvinism of the early 1990s, and point to the historic role of anti-Armenian feeling in Georgian nationalism. The Georgians, for their part, were angered by the rebellion of the Karabakh Armenians against Azerbaijan, and even more by the support of Armenians in Abkhazia for the Abkhaz side in the war of 1992-93, when the "Bagramian battalion" (named after the Armenian Marshal of the Soviet Union) fought on the Abkhaz side.

The attachment of local people to the Russian base in Akhalkalaki is increased by the fact that (according to varying figures I was given) between 30 and 40 per cent of its soldiers are in fact local Armenians – and to judge by the appearance of the soldiers I saw, this would seem accurate. Due to the distinguished role of Armenians in the Russian and Soviet armed forces, this local recruitment applies not just (as in Tajikistan) to the rank-and-file, but also to the officer corps. These soldiers hold Russian as well as Georgian and sometimes Armenian passports.

Their presence underlines what is by far the most important reason for the desire of local people to keep the base – its crucial economic role in a deeply impoverished region. It is quite simply the only major economic entity still working. In the 1980s, this was a modestly prosperous area. Today, the meat factory, dairy, clothes factory, furniture works, cement works, printers, shoemakers and chicken battery are all closed. The railway, established briefly towards the end of Soviet rule, has been torn to pieces for scrap.

Electricity is better than in most of Georgia, because it is provided by neighboring Armenia – but it is still extremely limited and unreliable. Other than smuggling across the border from Armenia (with drugs and other goods often coming originally from Iran and points east), the Russian base is by far the biggest employer, responsible for supporting a quarter or more of the local population. It also provides medical care, at least for informal fees, and brings in goods from Russia, which are resold in local markets. The USA has pledged $10 million to help Russia withdraw the bases, but the local population in Akhalkalaki does not expect to see any of this.

In the words of Ararat Essoyan, Chairman of the more moderate local Armenian political group, the Union for Reform and Democracy, "Our organization is for integration into the world economy; but the actual state of our economy today is such that withdrawal of the base would have a catastrophic effect, and this in turn could have dangerous results politically." He warned that this could change the present sullen acceptance of Akhalkalaki's status into a demand for autonomy – as demanded by the more radical local group, Virk - or even separation. Essoyan's point about the economic situation was emphasized by the fact that most of the interview was conducted by candlelight, in the only room of his party headquarters which could be even partially heated.

This was echoed by Malkhaz Khoshtaria, the deputy Georgian presidential representative for the region of Javakhetia that includes Akhalkalaki, speaking in his (also unlit and freezing) office in the town of Akhaltsikhe. "At present, the base plays an absolutely vital economic role. Before we can even think of closing it, we will need to have implemented a serious development program to replace it, beginning with a new road," he said. "I was posted for three years in Akhalkalaki before coming here, and I wrecked two cars on that terrible road