SUKHUMI, Georgia (Reuters) - Burned-out Soviet tower blocks loom over the Black Sea coast of Georgian breakaway region Abkhazia, whose ambitions to become a tourist hotspot are shattering as the global crisis cripples Russia's economy.
Though pockmarked from the separatist war with Georgia in 1992-93, this sub-tropical strip of land attracts tens of thousands of Russian tourists drawn by prices long gone in the motherland and a longing for Soviet nostalgia.
Russian-backed shiny hotels and restaurants have sprung up along the winding promenade in the region's capital Sukhumi.
Filling such places, though, is getting difficult.
"I fear this crisis, and it's making it hard to say if people will come or not," said Nikolai Chekhalin, a 26-year old hotel manager from Nizhny Novgorod in western Russia.
He runs the Inter-Sukhum in the capital, which charges 1,200 roubles ($38.47) for a single room and was revamped from a crumbling Soviet eyesore last August.
New buildings clash with bombed out health resorts across the 8,000-square km (3,088 sq miles) strip that was once the playground of the Soviet elite.
Rates at the hotel will be slashed by a fifth beginning next month if demand slumps as expected, Chekhalin added.
Fifty-one year-old Ashot, who sells arable plots for vineyards inland and south of Sukhumi, blames the drop in custom on Russia: "They have a crisis in Russia, so now we have one. They are Abkhazia's lifeline."
While it is difficult to gauge the health of the economy -- the government will not start calculating its Gross Domestic Product (GDP) until 2010 -- total trade more than doubled in the past four years to 7.1 billion roubles ($228.7 million) in 2008, Abkhazia's Economy Minister Kristina Ozgan told Reuters.
Citrus fruits, persimmons and hazelnuts are sent to Russia, while Turkey, home to half a million ethnic Abkhaz who fled before and during the separatist war, buys up timber.
"We are a small republic without our own currency and dependent on the Russian rouble," Ozgan said.
This means fewer tourists, she said, but more worryingly: "Prices have shot up on building materials, making it difficult to construct and putting off investors."
This year, the government expects to make 1.55 billion roubles ($49.92 million) in revenue from tourism and trade with Russia and Turkey.
Russia and Georgia's war last August over second breakaway region South Ossetia have also scared off investors who fear violence could also befall Abkhazia, hotel manager Chekhalin said.
After the war Russia recognized as independent both rebel regions, where the majority of residents have been given Russian passports. The rest of the world -- apart from Nicaragua -- considers the regions as part of Georgia, though it lost control of both in the early 1990s.
A flow of steady cash from the motherland by way of aid packages and trade means Abkhazia has plunged into total dependency on Russia, though the region's self-styled president Sergei Bagapsh has repeatedly said it does not want to be absorbed by Russia.
For 2009, Russia has allocated 2.4 billion roubles of aid, of this year's total Abkhaz budget of 3.9 billion.
Just under half will go toward social and economic programs, such as monastery and road repair.
Gagra, 60 kilometers north of Sukhumi, is banking on its close proximity to Sochi, where Russia will hold the 2014 Winter Olympics, for prosperity.
The spot was favored by Soviet leaders Josef Stalin and Nikita Krushchev who both owned luxurious summer estates nearby, and their taste is testament to Moscow's love affair with the region, which is continuing.
Bagapsh now lives on the top floor of the clifftop army green dacha where Stalin plotted and entertained party officials and mistresses for 20 years. Stalin hung chandeliers absconded from murdered Czar Nikolai II and watched Charlie Chaplin films in an airy, wood-paneled cinema.
Estate agents said prices near Gagra for a prime waterfront hectare (10,000 square meters) have shed around 10 percent to around 15.5 million roubles ($496,900) due to the crisis -- which is around the same price as the cheapest Moscow suburb -- but should pick up ahead of the Games.
"Sochi is becoming a mini-Moscow with crazy prices. Builders (for the Games) will come down here instead," local estate agent and Gagra native Givi Ketia said.
Plots several kilometers (miles) from the beach in the Gagra area have fallen by half to under $90,000 per hectare.
Russia's lower house of parliament, the Duma, said last month that 100,000 Russian workers, around half the region's current population, will need to be stationed and commute from Abkhazia, where rent is cheaper.
A law by which only Abkhaz citizens can buy land is easily bent and Bagapsh told Russian business daily Kommersant last week (May 25) that he has asked for it to be amended to allow for Russian ownership.
He added Abkhazia is ready to provide raw materials for the Games such as gravel.
Reporting by Amie Ferris-Rotman, editing by Paul Casciato