SUKHUMI, Georgia, April 1, 2008 (AFP) - Gutted by fire in a separatist war 15 years ago, the Tourist Hotel on the lush Black Sea coast of Georgia's rebel Abkhazia region is finally being renovated.

Financed by Russian businessmen, the investment is part of a wave of rubles washing into the Moscow-backed province -- fuelling tensions with the Georgian government, which has vowed to retake control of its province.

Earlier this month Russia ended 12 years of trade sanctions against Abkhazia, giving the green light to investment in the region, known throughout the Soviet Union for its long beaches, dense forests and dramatic mountains.

Lured by nostalgia as well as tax breaks, Russian businessmen are happily taking their money south of the border, even if the self-declared Abkhaz republic is in a legal vacuum and not recognised anywhere in the world.

'I love this country, the climate. We even speak the same language,' said Alexander Khrushchev, a businessman from central Russia who has invested in the 200-room Tourist on the sea-front in the regional capital Sukhumi.

Months before the planned opening, Khrushchev is already working with Russian tour agencies.

'There is no risk' of instability, he said, as he vowed to pour more money into the region. Like other foreign investors, he can take advantage of a three year tax holiday for investments of 100,000 dollars once they turn a profit.

But a ruined building visible amid the palms from the Tourist Hotel's presidential suite is a reminder of the chaos that gripped the area in a 1992-3 war that saw 250,000 ethnic Georgians -- half of the population -- expelled.

Georgia still trades fiery rhetoric with the Moscow-backed leadership and the stand-off occasionally descends into fire-fights.

Support for Abkhazia by Russia, which has given passports to 90 percent of the region's residents, has also fuelled a diplomatic stand-off between Moscow and Georgia.

Reports that some of the billions of dollars being spent to prepare the nearby Russian resort of Sochi for the 2014 Winter Olympics could trickle into Abkhazia have not soothed Georgian fears, said Beslan Baratelia, a local economist.

While real estate prices soar in the booming Sochi region, the cheap and relatively unspoiled beauty of Abkhazia is attracting Russian attention, she said.

'The Russian coastline is all taken up. In Abkhazia, there is free land,' said Nadezhda Venediktova, editor of the Echo of Abkhazia newspaper.

Venediktova is editing a tourist guide for Abkhazia for a Russian publisher, who scored 5,000 sales of a Russian-language road atlas of the region last year.

While most just take in the sun and sea air, some 30 Russians every week take advantage of free legal advice on how to do business in the region, she said.

The Tourist Hotel hopes to tap into the growing Russian interest.

Walking through the dust thrown up by the renovations, the director of the Tourist Hotel, Ruslan Katsia, shows off what will be the first bowling alleys in the city.

Tour groups will be offered three meals a day to make up for the lack of restaurants in the city, he said.

So long as there are no surprises in the next few months, the hotel will open July 5.

'This summer we expect to be full,' he said.