The money will be used to provide loans to members of the army, Interior Ministry, and security service who face redundancy in line with de facto President Eduard Kokoity's plans to downsize the armed forces, to enable them to open their own small private businesses.
Former South Ossetian Prime Minister Oleg Teziyev, now an opposition politician, was quoted by the Russian daily "Kommersant" on July 29 as suggesting that the loans constitute a bid by Kokoity to buy the loyalty of the armed forces. Kokoity's presidential term expires in November 2011 and he has already said he does not intend to run for reelection. He will therefore, Teziyev pointed out, need to build an alternative power base.
The planned drastic cutback in the manpower of the armed forces was first announced early this year. On March 24, Kokoity said it would affect in the first instance personnel approaching retirement age.
But opposition People's Party leader Roland Kelekhsayev told RFE/RL's Echo of the Caucasus in April that the army would in fact be downsized from 3,000 to 200 men. Kelekhsayev said at that juncture the cuts would not be implemented before June as the authorities "still don't know what to do" with the army and Interior Ministry personnel who face dismissal.
On June 8, the kavkaz-uzel.ru website reported that the first 400 military personnel -- mostly men over the age of 50 -- would be demobilized the following week.
The account for the benefit of war victims from which the money for the armed forces has been disbursed contains over 1 billion rubles ($33 million), Kokoity told visiting Russian Prime Minister Vladimir Putin in May. A special oversight board for that account was created in May.
Russian State Duma CIS Affairs Committee Deputy Chairman Konstantin Zatulin, notorious for his conviction that Russia has the right to take any measures deemed necessary and effective to restore its control over the former Soviet republics, told "Kommersant" he had accepted a proposal to join the oversight board. He added, however, that he had not yet been asked to do anything in his capacity as a board member, and had no idea what the money would be used for.
A further 50 million rubles from the same bank account will be transferred to a second fund named "Revival." South Ossetian parliament chairman Stanislav Kochiyev, who signed the July 20 decree, was quoted by "Kommersant" as saying he had only the haziest idea what Revival does.