South Ossetia has emerged as an unlikely banking center, providing financial services that connect Russia and the self-declared, Kremlin-backed breakaway republics in eastern Ukraine, according to officials in all three regions.
While the eastern Ukrainian “people’s republics” are intent on reorienting their economies toward Russia, in the short term, Moscow must prop up large industrial enterprises in Donbas. The de facto capital of South Ossetia, Tskhinvali, plays an important role in facilitating Russian subsidies.
In April, the de facto authorities in the Donetsk People’s Republic announced that they were putting the bulk of the territory’s massive industrial enterprises under a little-known holding company reportedly based in South Ossetia. And for the last two years Tskhinvali has hosted a bank that manages payments between Moscow and the two eastern Ukrainian breakaway republics, Luhansk and Donetsk.
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