BACKGROUND: On July 25, the chief of the South Ossetian customs service, Murat Tskhovrebov, told the republican informational service that South Ossetian and Russian officials had previously discussed opening a joint customs point at Lower Zaramag, in North Ossetia, which is part of the Russian Federation. The goods traveling via the Roki tunnel from Russia into South Ossetia currently have to pass two customs controls – the Russian, at Lower Zaramag and the South Ossetian, at Ruk. Even though no official date has been set for merging the customs services, the fact that intensive consultations are held indicate that it may happen at any time. Depriving South Ossetia of its border controls at the border with Russia, however nominal they may be, will effectively render this territory even more like another Russian region. This step is designed as part of Moscow’s signaling game intended to steer Georgia’s political course in a direction desired by Russia.

Russia officially recognized South Ossetia in August 2008 after a brief war with Georgia. Although South Ossetia has heavily depended on Moscow for its security and funding, the authorities of the tiny territory have sought to retain a semblance of agency, clashing with Moscow over positions in the republican government. The latest parliamentary elections in June 2014 brought the opposition party United Ossetia to power in South Ossetia. The opposition party’s primary political slogan has been to join South Ossetia with Russia. Moscow’s favorite politician, Anatoly Bibilov, heads the party, and the election results indicated a tighter Russian control over the republic.

The most vivid consequence of the political change came in July, when South Ossetia officially recognized the “Donetsk People’s Republic” and “Lugansk People’s Republic” in the restive Eastern Ukraine as independent states. The surprising recognition came even though South Ossetia’s president Leonid Tibilov had warned earlier in June that South Ossetians should keep away from fighting for the pro-Russian forces in Ukraine. The South Ossetian government also recognized these entities ahead of their principal supporter and creator, the Russian Federation.

Interestingly, even pro-Kremlin Russian analysts recognize the purely instrumental role that this territory plays in Moscow’s strategic plans in the South Caucasus. In an interview for the Ekho Kavkaza radio, the Russian expert on South Ossetia Yevgeny Krutikov lamented the fact that several Russian agencies are dealing with the republic, rather than one that is principally responsible. According to Krutikov, this creates “chaos,” since South Ossetians do not understand what Moscow wants them to do. “South Ossetia turns into a playing card, an instrument for the power games of the Russian groups of influence, which use the republic and certain individuals in Tskhinvali without much thinking about how this will impact them.” Indeed, South Ossetia’s recognition of the Ukrainian breakaway “republics” has hardly benefited its fragile statehood.

IMPLICATIONS: Vladislav Surkov, one of the Kremlin’s most famous administrators, has reportedly returned to oversee Russian politics in South Ossetia. Even though Surkov was earlier dispatched to the South Caucasus, he disappeared from the region’s politics as the events in Ukraine unfolded, apparently dedicating his time to overseeing Russian policies in Ukraine. Having returned to the South Caucasus, Surkov replaced two other Moscow officials that oversaw Russian policies toward the Georgian breakaway republics, Vladimir Chernov and Sergei Chebotaryov from the Administration of the President of Russian Federation. These administrative reshuffles in Moscow reportedly impact who among the South Ossetian public figures and what political forces receive the most favorable treatment from Russian authorities.

Speaking of the possible implications of joining the customs services of Russia and South Ossetia, Russian economist Alexander Karavayev alleged that Georgia’s signing of the Association Agreement with the EU would actually be beneficial for Russia as it would allow the country to develop a more profitable relationship with its South Caucasian neighbor. Georgia and its European allies would in Karavayev’s opinion react positively to the removal of the South Ossetian border checkpoint as a symbolic step to roll back Russia’s recognition of South Ossetia.

Despite Karavayev’s optimistic assessment of the imminent boost to Russia’s economic ties with Georgia, the Russian government’s signals tell quite the opposite story. At the end of July, Russia’s Ministry for Economic Development announced that at the request of the Russian Ministry of Foreign Affairs, it prepared a government decree for suspending the free trade act between Russia and Georgia from 1994. The new legislation is explicitly tied to Georgia’s drift toward the EU and is currently undergoing evaluation at the Russian Ministry for Justice. A suspension of the free trade agreement between Russia and Georgia will reportedly come into force simultaneously with the agreement between Georgia and the EU.

Besides the geopolitical competition between Russia and the EU that precludes the current Russian regime from recasting its relationship with Georgia in cooperative terms, there is also at least one important domestic consideration for Moscow. If Russia started building closer economic ties with a Georgia that features a higher level of integration with the EU, the bordering North Caucasus would become one of the primary beneficiaries of such relations. Given Russian fears of separatism in the North Caucasus, Moscow certainly would not like to see even a remote presence in this territory of the EU or of its agents. Economic prosperity in the North Caucasus that does not depend on financial aid from Moscow would also be considered detrimental to Russian policies in the region. Therefore, the current Russian government is unlikely to welcome a more prosperous and EU-aligned Georgia. Moscow is even less inclined to allow an expansion of the Georgian-Russian economic ties, as it would directly affect its tight grip on the North Caucasus, undermining its control over this region.

An alternative for Moscow is to play the South Ossetian card, oscillating between formally annexing this territory and symbolically downgrading its own recognition of it. Military gambles also remain a possibility, because the EU’s promise to Georgia is so lucrative that the elaborate signaling game played by Moscow is unlikely to find much appeal among the relevant officials in Tbilisi.

CONCLUSIONS: As Georgia has taken decisive steps toward establishing a close relationship with the EU that is based on expanding economic ties with the Western alliance, Moscow’s response to this development is to use economic sanctions and its satellite statelets in the South Caucasus to thwart it or at the very least make Georgia’s transition as hard as possible. Considering the administrative reshuffles in Moscow among the policymakers working on the South Caucasus, it appears that the Russian government is considering a wide range of options in Georgia that may even include military action. The tiny territory of South Ossetia may again become one of the Kremlin’s pawns, and used to stir instability and advance Russian interests in the region.

AUTHOR’S BIO: Valeriy Dzutsev is a Senior Non-Resident Fellow at Jamestown Foundation and Doctoral Student in Political Science at Arizona State University.