CHECHEN WAR CLOUDS GEORGIA'S ECONOMIC HOPES

CHECHEN WAR CLOUDS GEORGIA'S ECONOMIC HOPES

The brutal Russian conquest of the Chechen capital of Grozny has immeasurably increased the strategic importance of the former Soviet republic of Georgia to the United States and its Western allies.

With a population of 5.1 million people and only a small military, Georgia, which lies directly south of Chechnya, now finds itself in an extremely vulnerable position.Like many of the new nations formed during the collapse of the Soviet Union, Georgia has long been worried about defending its borders against external aggression.

Those concerns have taken on a new urgency with nationalists in Moscow talking openly about restoring breakaway Soviet republics to Russia and Russian troops in Grozny preparing to move south in Chechnya to Russia's 450-mile border with Georgia.

In addition, Russia's 5-month-old military campaign in Chechnya has created hundreds of thousands of refugees - including some who already have fled across Georgia's northern borders. If Russian troops decide to advance into southern Chechnya, the current trickle of refugees into Georgia could become a tidal wave.

Whether Russian tanks would stop at the Georgian border is problematical given the resurgence of nationalism with the new government of Acting President Vladimir Putin. There is a growing fear that temporary hot pursuit could lead to a permanent Russian military presence along the border or perhaps even inside Georgia.

These potentially momentous events are unfolding as Georgia, under the leadership of President Eduard Schevardnadze, seeks to solidify its nascent democracy against serious internal challenges - most notably from those officials of the former regime for whom corruption remains a way of life.

Unlike its neighbor Armenia, and unlike many of the other nations in the volatile Caucasus region, Georgia has pinned its hopes for stability and development on complete and total integration with the West, and particularly the United States.

There is much at stake for the United States as well.

Russia has not gotten over the loss of territory in the region, as its dedication to the war in Chechnya shows. It has sought to pressure Georgia in numerous ways, through the stationing of troops in Georgia, through support for Georgia separatists and through efforts to change Georgia's democratically elected leadership through assassination.

Russia also sees commercial advantages by pressuring Georgia. Right now, Georgia is the transportation hub for two proposed oil pipelines that are poised to take oil and natural gas from the Caspian Basin to markets in the West.

Moscow, which still views the Caspian as a Russian lake and covets the inland sea's vast resources, has been proposing a third route - one that would bypass Georgia and other Western nations.

To the extent it can destabilize Georgia, Russia can lessen the enthusiasm of Western investors for the Georgia-centered pipelines and boost the fortunes of its pipeline.

Meanwhile, Georgia has moved decisively to counter the Russian threat. Its government is democratically elected and represents the entire spectrum of political forces within the country.

And it has enacted perhaps the most sweeping set of economic reform laws of any of the countries of the region and has worked diligently to enforce them.

As a result, Western investment is flowing into Georgia. More would flow, and the rate of investment would increase, once Georgia roots out the petty corruption that is leftover from the Communist years.

Georgia's domestic and foreign-policy initiatives fit in line with U.S. policy for the region, which seeks to encourage democracy and market capitalism while trying to mute a resurgence of Russian imperialist motives.

Relations between the Clinton administration and Schevardnadze's government have been warm. But there is more to be done. A complete U.S. policy for Georgia should include:

* Tighter relations between Georgia and NATO. While it is unrealistic to have Georgia become a member of NATO soon, it is not unrealistic to think that Georgia could become a member in the next decade. Washington should state this as one of its foreign-policy goals for the region.

* Express U.S. support for the South Caucasus regional security arrangements now under discussion. At the same time the United States supports the creation of a regional organization, it also should take the lead in assuring Russia that such an organization offers a stability that benefits Russia as well.

Georgia, and the democracy that flourishes there, has entered a vulnerable time. It is still beset by tremendous external and internal pressures. Its people bear a heavy burden.

Washington should do all it can to provide Georgia, and the region in which its sits, desperately needed aid and moral support. The potential benefits are too great to ignore.