Large-scale fighting has broken out between Russia and Georgia. According to news reports, Georgia launched an offensive to suppress secessionist forces in the breakaway region of South Ossetia; the secessionists have long been backed by Russian troops. Russia has responded by launching a counteroffensive and bombing targets throughout Georgia.
At this point, I don't have enough information about the situation to comment in any great detail. For example, it's hard to assess the validity of Georgian President Mikhail Saakashvili's claim that Russian airstrikes have been "specifically targeting [the] civilian population." (though sadly, it would not be a complete surprise if they were, given Russian practices in nearby Chechnya). Moreover, the backstory to this conflict is long and complex, and I doubt I have the knowledge to make more than tentative judgments about it.
That said, I think it's unlikely that Russia's role here is entirely benign, given the longstanding history of Russian imperialism in the region, Russia's recent aggressive policy towards its neighbors under Vladimir Putin, and Georgia's role as a recently democratized state and ally of the US that Russian leaders fear as a potential catalyst for pro-democracy movements within Russia itself. At the same time, it was probably unwise of Saakashvili to launch a large-scale offensive in South Ossetia that he should have realized could lead to war with a much more powerful state - a war that Georgia probably can't win if Russia is willing to commit enough of its forces to overwhelm the Georgians. Both of these points are, of course, tentative and could be invalidated by later revelations.
The conflict also has important implications for the US. Georgia has 2000 troops serving in the US-led coalition in Iraq, which are now likely to be called home. At this point, the Georgian force is the third-largest Coalition contingent in Iraq (after the US and Britain). The fighting could disrupt strategically important oil pipelines passing through the region. The US faces a difficult dilemma in so far as we may have to choose between backing a staunch ally and Bush's effort to improve relations with Russia (whose cooperation he needs on issues like the effort to impose sanctions against Iran for its nuclear program).
UPDATE: Washington Post columnist Anne Applebaum, an expert on Russian politics and foreign policy, has an excellent op ed on the conflict.
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