Tskhinvali, South Ossetia  - Thank God for the economic crisis, says the local man in charge of South Ossetia's reconstruction: it sent Russian investors clamoring to take part in the rebuilding of this tiny Caucasus region - or so he says.

Information is hard to come by in this isolated breakaway state, where European ceasefire monitors and international aid workers have been barred access, but a different picture has leaked in the Russian press.

The government is growing increasingly queasy over how its generous aid money is being spent and potential investors are refusing to fork up to Kremlin pleas as long as its burly separatist leader remains at the helm.

Russia has pledged 21.5 billion roubles (592 million dollars) in aid since fighting Georgia over the breakaway region in August, according to the head of the republic's Committee for Reconstruction, Zurab Kabisov.

"We will get as much as we need until the last brick is in place. Russia is fulfilling its role of big brother perfectly," he said.

South Ossetia has become Moscow's de facto protectorate since Russia beat back Georgia's attempt to retake the breakaway region in August, but with millions in reconstruction aid gone missing and opposition growing to Moscow's puppet president is threatening to become an embarrassment.

In one of the neighbourhoods most severely hit by the fighting, along Telmen Street, debris still litters the streets and the houses looked as they had in August, like crumpled cardboard.

But it is six months later, and winter, and people are trying to cope in their badly damaged abodes.

"My husband fixed the apartment himself. There was lots of snow, it doesn't help very much," said Tama Gasyev, one resident of the city center complaining of the cold. They heat themselves and cook on an old electric stove.

There is no central gas in the center since Georgia cut supplies after the hostilities in August. Russia's gas monopoly Gazprom is building a new pipeline, but it won't start pumping until the end of 2009, local officials said.

"The amazing thing is that people want to come back," said one Russian human rights worker. "Apartment prices have gone up. It's like Grozny," she compared the scene to the Chechen capital, scarred by two separatist wars against Moscow in the early 1990s.

Kabisov said 606 houses in the capital needed to be rebuilt from scratch. "Telmen street will be as beautiful as the Starye Arabat," Moscow's oldest pedestrian street, he said, but admitted the construction work has not started yet.

Still, the hospital and about 10 schools and kindergartens have been rebuilt.

On the outskirts of the Jewish quarter, one of the neighborhoods most damaged in the recent fighting, sits one school donated by Russia's Tyumen region and looking like it was just plucked from a model neighborhoods brochure and dropped in an apocalypse script.

Two toddlers in their mother's arms struggled over a plastic gun and Alan Tedeyev, 41, a local defence ministry employee dressed in army greens, Alan Tedeyev, 41, stopped to pick up his boy and girl.

"Our independence comes at a price, of course - with recognition comes responsibility for Russia. We are a small country, we can't stand on our own, people have a lot of expectations now, or call it hope," he said. Tedeyev is one of many here, who believe Russia's recognition of South Ossetia will lead to eventual unification.

The Kremlin is more sensitive than ever about its image to investors abroad and in the public's eye as it grapples with the impact of the financial crisis. One image it will seek to avoid is growing social discontent in South Ossetia while Georgian war refugees receive new housing on 4.8 billion dollars in US and EU aid.

Two high-ranking former South Ossetian officials accused the republic's Moscow-backed leader Eduard Kokoity of embezzling funds in separate interviews with business newspaper Kommersant since December.

Most unflattering, Kokoity's opponents have accused him of turning tale and taking shelter far from the front lines of the fighting.

But Kokoity, a former freestyle wrestler, admitted problems in an interview and suggested Russia was imposing stronger controls over its aide money.

"Some forces, some builders, unknown people who tried to divert aide," Kokoity said from a seat in front of the Russian and South Ossetian flags in his cabinet.

"We have a responsibility to every Russian citizen that this money be used in a valuable way ... So we think it is better this money, what is not yet needed, stay with the finance ministry of the Russian Federation."

But standing outside the fire-blackened shell of his former apartment building in the city center Kazbek Gazayev, 55, said he had little hope.

"You only get help if your connected," he said. "Maybe I would get compensation if I was the parent of a dead fighter, but my son is a doctor. Is that any worse?" (dpa)