The crisis erupted on Sept. 27, when Georgian President Mikhail Saakashvili arrested four Russian officers, accusing them of helping plan a coup against him. The men were soon released, partly under pressure from the United States, but Moscow promptly imposed heavy trade and financial sanctions and recalled its diplomats from Tbilisi. Russian officials have denounced Georgia’s government as “fascistic,” and the Russian Parliament decried its “state-sponsored terrorism.” For his part, Saakashvili accuses Russia of “planning to ruin Georgia.”

This comes amid other developments pushing the region toward potential conflict. A key one is unfolding many hundreds of kilometers away, in the Balkans, where the West is likely to soon grant independence to the breakaway Serbian province of Kosovo. What’s the link? During the breakup of the Soviet Union, indigenous groups in the Georgian regions of Abkhazia and South Ossetia fought separatist wars in which they received barely veiled help from the Soviet military. These territories have since enjoyed de facto independence, though they aren’t formally recognized by any state, including Russia. Moscow has granted Russian citizenship to most of their people, while Russian “peacekeepers” continue to “separate” local forces from their Georgian antagonists. This uneasy truce has prevailed since 1993, broken by periodic violent flare-ups.

But on Sept. 9, when Vladimir Putin invited a group of Western experts to dinner, including me, he issued a stern warning. If the West recognizes Kosovo’s independence, Russia may do the same for the former Georgian republics. “It is inadmissible to apply one rule to Kosovo and another to Abkhazia and South Ossetia,” he told us. “Such a policy cannot be ethical and has no future.” Probably encouraged by Moscow, South Ossetia has scheduled a referendum on independence for November. Meanwhile, Saakashvili warns that any attempt to wrest these regions away would force Georgia to “go to war.”

As Russians see it, the West’s differing approach to the Balkans and the Caucasus reeks of double standards. Moscow considers itself duty-bound to support Abkhazia and South Ossetia, if only because of fraternal ties. Hundreds of thousands of ethnic Russians live in the republics of the North Caucasus, and the last thing Russia needs is more ethnic unrest in that volatile region. Moscow is also extremely hostile to Georgia’s westward tilt. Washington has sent military advisers and equipped the Georgian Army. With the encouragement of many in Washington, Tbilisi is loudly pushing its desire to join NATO. Seen from Moscow, this looks like a U.S. strategy to encircle Russia, destroying its influence in the region.

The Bush administration has repeatedly assured the Kremlin that it is putting heavy pressure on Saakashvili’s government not to attack the breakaway regions. Yet Moscow can’t help but see a contradiction. Exhibit A is the fact that the United States continues to arm and train Georgian forces. Moreover, Russians see Georgian adventurism as encouraged by less restrained U.S. politicians, such as John McCain and other senators who visited Georgia in recent months and expressed strong support for Georgian aspirations. McCain’s helicopter allegedly came under fire as it flew over South Ossetia.

On other fronts, the Russian government was infuriated by the Bush administration’s earlier moves to bring Ukraine into NATO. Publicly, it muted its criticism. In private, Russian officials threatened severe retaliation, including the possibility of ending Russian participation in the Iran nuclear talks and lifting Moscow’s freeze on weaponry sold to Tehran. The issue is currently moot–Ukraine itself has decided not to seek NATO membership–but a legacy of bitterness remains.

Other grievances have also festered. Moscow strongly resents the fact that America is the last major country blocking Russian membership in the WTO. Moscow’s response has been to threaten to exclude U.S. energy companies from the development of the immense Shtokman gas field in the Barents Sea. In Europe, Russia watches Chinese companies invest with minimal trouble. Yet when Russian entities seek to buy stakes in Airbus, Arcelor or other European corporations, there has been a panicky and hostile reaction. Putin put it bluntly: “If the Europeans want us to let them into the very heart of our economy today, energy production and transport infrastructure, then we want to know what we would get in return.” The Russian president clearly remains committed to cooperation with the West and to Russia’s integration into world markets. (His harsh warning on Georgia stood out precisely because his other remarks were so studiedly mild.) But a senior aide pointedly warned that whoever replaces him in 2008 may be less well disposed to the West.

The special danger with Georgia is that it’s so laden with emotion. Since the fall of the Soviet Union, Russians have been infuriated by the way Georgia has swallowed billions of dollars in Russian gas subsidies and remittances from Georgian workers in Russia, yet allies itself with a West that has provided only a fraction of this help. The way Georgian leaders paint Russia–accusing it of past repression and human-rights abuses, among other things–angers many Russians, especially considering that the greatest tyrant in their own history, Joseph Stalin, came from Georgia. Putin is immensely disciplined, not given to speaking loosely or acting rashly. His foreign and domestic policies reflect his essential pragmatism and caution. Yet I worry that when he looks at Georgia, anger may take over. Add in Georgia’s determination to regain its lost provinces and Russia’s determination to resist this, coupled with U.S. support and the specter of Georgia’s joining NATO, and we have all the elements of a tragic conflict.