Armenia and Georgia count the cost of six winters of democracy independence and democracy Development should not mean abandonment. People still suffer

Donors are closing their purses. They decree that the Caucasus has advanced from relief Ordinary people face yet another winter with no central heating and only a few hours of electricity each day
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It is a hard and merciless landscape, this corner of eastern Armenia. The only birds are hoodie crows and magpies, flapping among leafless bushes. The clouds of a snowstorm slowly obscure the mountains of Azerbaijan and then the steppe which stretches up to the Azeri frontier, drawing in towards the drystone hovels where the refugees live.

We enter the house of the Russian woman. It is pitch-dark, cold as a tomb. The smoke of turf-clods smouldering in an iron stove makes the eyes stream but gives no warmth.

After a time, I can make out things. There is the outline of a tousled small boy, standing at a window stopped with plastic sheeting instead of glass. There is the white finger of an unlit candle on a cupboard, and a pale confusion on the floor which is the family bed. Finally, there emerges from the murk the silhouette of a tall young woman, leaning against the door-frame. She begins to speak - strange to hear the music of the Russian language in this savage place - but her face remains in darkness.

Once she lived well, married to an Armenian in the Azeri city of Kirovabad. Then, in 1988, began the conflict between Azerbaijan and Armenia over Nagorno Karabakh, followed by anti-Armenian pog-roms in the Azeri cities. The family fled, abandoning everything, and was settled in this wretched village once inhabited by Azeris who had been driven across the border when the killing started. The husband vanished. Without water, heating or money, two of her four children died of malnutrition.

Oxfam has now provided the village with a water pipe, and the other villagers give the Russian woman bread when they can. But they are struggling to survive themselves and cannot always help. At first, she had electricity. But the post-Communist authorities cut the village's power off, and now demand from each family the equivalent of US$20 to reconnect the meter. A lucky refugee may get $7 a month in state support. The Russian woman's future is in every direction darkness.

I have been travelling in Armenia and Georgia to see something of Oxfam's operations in the Transcaucasus, as the sixth winter since the collapse of the Soviet Union sets in. Few regions of the old Soviet empire have paid such a terrible price for independence, for the transition towards a market economy and for democracy - the last a very unsteady foal.

That price has been paid in two kinds of suffering. The first is the plight of nearly 2 million refugees displaced by war, or by the 1988 Armenian earthquake. The second is the mass misery of ordinary people, whose lives have been devastated by economic collapse and the demolition of the old Soviet welfare system.

In Georgia, nationalist risings have made some 250,000 people homeless. Most are Georgians and Mingrelians who lost their homes when Abkhazia rose successfully against Georgia in the war of 1992-3. In Armenia, there are some 300,000 refugees from Azerbaijan, and tens of thousands still homeless eight years after the Armenian earthquake. In Azerbaijan, which lost the Nagorno Karabakh war against Armenia and received nearly 750,000 refugees, there are enormous tented encampments three years after the end of the fighting. These are small countries: Azerbaijan is the most populous with 7.2 million inhabitants, and about one in ten of them is a refugee. Armenia, with 3.6 million, has about the same proportion. Georgia has about 5 per cent.

The art of relief work includes understanding what you can't do. In Gumri, once Armenia's second city, where tens of thousands of earthquake victims remain homeless, a tuberculosis hospital had collapsed. The patients are still living in metal freight containers although the local authority promised two years ago to rebuild the place. The director, although supplied with generator fuel by Oxfam, can only afford five hours of electricity for light each day; the place is unheated because if he switched any of his budget from food to heat, the patients would starve as well as freeze.

To prolong such misery by providing what local government should provide is almost a crime in itself. Yet how can you refuse? At Poti, on Georgia's Black Sea coast, we visited a crumbling building crammed with 200 refugees. Oxfam had provided new windows and a repaired sewage pump. But somebody had stolen the pump's cable, so that the basements had become cesspits, brimming over with excrement; the roof was giving way and the jerry-built cladding was falling apart. No amount of cash could make that frightful slum habitable. The team stood in front of it, surrounded by verminous children and pigs gobbling rubbish, and gloomily admitted defeat.

The best thing which an aid agency can do is to help victims out of dependence. In a factory at Zugdidi in Georgia, an engineer from Doncaster was supervising the prefabrication of wooden huts he designed - little more than uninsulated garden sheds, but offering the refugee family a place which was clean, private and their own. They could sell it, at a pinch, but they could also dismantle it in an hour or two and erect it somewhere else. In Armenia and Georgia, Oxfam was organising refugees to knit jerseys, weave carpets, make bedlinen sets and produce fur-lined boots - goods at first for distribution to the needy but eventually for sale. At the end of this process, aid agencies hope to hand over going commercial concerns to local people.

Oxfam hesitated before going into the Caucasus. They worried that it might divert funds better used in African emergencies. So they compromised; although Oxfam usually provides the main finance for its own operations, this time the agency would raise most of its Caucasus funding from "the donors" - in this case, the UN High Commission for Refugees and theEuropean Community Humanitarian Office (Echo).

Now both donors are closing their purses. They decree that the Caucasus has advanced from "relief" to "development". At the macro level, there are signs of recovery; the economies are beginning to grow, and in the future Caspian oil is going to make Azerbaijan and probably Georgia rich. But at the grassroots, ordinary people face yet another winter with no central heating and only a few hours of electricity each day. They struggle to fit Asian incomes to European prices, in a world where jobs and health care are little more than memories.

In Gumri, I watched Oxfam explaining to their boot-making team the impact of Echo funding cuts. Production would fall from nearly 45,000 pairs a year to only 15,000, and 100 shoemakers would lose their jobs. In Zugdidi, a lot hangs on whether UNHCR will place an order for Oxfam's prefab huts, or decide that they are no longer appropriate to the "age of development" - thereby condemning hundreds of refugee families to more years in half- ruined slums.

The aid agencies have to carry the can. It is they who have to tell their charges that hopeful projects are being wound down - although the need for them is as urgent as ever, and so many of them are more than just relief.

"Development" is a fine thing. But in the Caucasus it can also be a smokescreen, obscuring an unfinished task, pretending that the victims of calamity have somehow become just the poor who are always with us. Behind that smoke and darkness, the Russian woman and her children are hidden while the world moves on to its next business.