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Matt Brown reports from Georgia -

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KERRY O'BRIEN, PRESENTER: First to the conflict between Georgia and Russia, where news has just
broken that the Russians may be about to call a halt to their military operation inside Georgia.

The news from Moscow that Russian President Dmitry Medvedev had indicated a ceasefire was in the
offing came just after the Georgian capital Tbilisi was rocked by an explosion believed to have
been from a Russian bomb.

At the same time Russian troops and tanks were reportedly moving closer to Tbilisi.

The Kremlin has consistently said the only way to end the fighting is if Georgia withdraws from the
breakaway South Ossetia region.

ABC correspondent Matt Brown is in the Georgian capital Tbilisi and I spoke with him by satellite
just a short time ago.

Matt, as I understand it you've just heard the news of an initiative by Russian President Medvedev
to call a halt to hostilities, is that correct?

MATT BROWN, REPORTER: Well that's what the Russian newsagencies are reporting, let's see how that
plays out on the ground Kerry. There's been an explosion just outside out Tbilisi this morning. I'm
told that it's near a reservoir, that a lot of the troops and their armour that retreated from
Ossetia were using that as a staging point, so they may well have suffered significant casualties.
There's also been fresh shelling in a town called Gori. Gori's important because it lies between
the capital here Tbilisi and South Ossetia where most of the fighting's been taking place and where
the Russian forces are in control. So, let's see how the order plays out on the ground and if
that's born out, the news from Russia in what actually happens here in Georgia.

KERRY O'BRIEN: But this is obviously still a dangerously fluid situation?

MATT BROWN: It certainly is, and let's not forget how this began. After harassment by separatists
in South Ossetia and a Russian military build-up the Georgian military moved in to try and take
control of South Ossetia and was obviously firmly rebuffed by Russia. These sorts of tensions have
been going on since the early 1990s, they can easily get out of control, but the Georgians have
really suffered a heavy blow here and they will be desperate to see this report about the cessation
of Russian military activity born out in practice.

KERRY O'BRIEN: Well, there's obviously a lot of conjecture and a lot of mystery about exactly what
the Russian game plan is. But what is the most likely scenario to you as to what Russia will want
from this?

MATT BROWN: Well, they've said they want to return things to the status quo anti, the way they were
before Georgia moved in to South Ossetia. What they've done is reject Georgia from South Ossetia,
demonstrate to everyone in Georgia, especially the Government, that Russia can at will isolate the
capital Tbilisi, it can at will move in to important towns on important roads in rump Georgian
territory. So at the moment I think Russia has probably achieved its objectives. It's shown Georgia
not to get uppity in South Ossetia and it's also dealt a significant blow to Georgia's hopes of
joining NATO and getting NATO allies in on this kind of a dispute. Who in NATO is going to want to
get involved in this kind of thing in the future?

KERRY O'BRIEN: Did Georgia really think that America or for that matter NATO countries would be
able to offer more than rhetorical support in the event of the kind of action that Russia has
indeed taken?

MATT BROWN: It would be fascinating to know what the diplomats were saying to the Georgian
President Mikhail Saakashvili. Why did he do this? United States has got wars in Afghanistan and
Iraq. Many NATO nations actually get a lot of energy from Russia. Why would they want to antagonise
this very, very big and powerful regional player who can choke off a lot of energy supplies to
Europe? And it's hard to understand why he did this. Was this just an incredible miscalculation?

KERRY O'BRIEN: Do you have any sense of how Georgians are reacting to President Saakashvili actions
in getting Georgia into this?

MATT BROWN: Well there's been a lot of patriotism. People you speak to are adamant that the
Russians are the bad guys in this equation. But the people who've suffered directly, people who've
had to flee South Ossetia, flee the towns around it in Georgia proper that have been bombed by the
Russians, they're very angry and they're saying so very publicly. They're arguing with government
officials in the streets. There are slums filling up, slums that have had refugees from the early
1990s, people who fled that fighting are now being joined in their cramped little rooms by people
who fled the latest fighting, and all of them are actually very upset with their President.

KERRY O'BRIEN: What is the most Georgia can hope for now?

MATT BROWN: The most Georgia can hope for is that the Russians will stop their military activity,
that there'll be a freeze and that there'll be an effort to at least get the Russians out of all
rump Georgian territory, get them back into South Ossetia, back into Abkhazia which is in the north
west of Georgia and see what happens from there. They wanted to completely change the equation,
weaken the Russian military and diplomatic hold over the breakaway territories, but they've
obviously dreadfully failed in that. The best they can hope for is to maintain sovereignty over the
rump Georgian territory that they controlled before this all began.

KERRY O'BRIEN: Matt Brown, thanks for talking with us.

MATT BROWN: A pleasure, Kerry.

KERRY O'BRIEN: Matt Brown with up to the minute news and analysis from Tbilisi in Georgia.